dated december 1, 2016 new issue rating electronic …jul 12, 2018 · spencer county school...
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DATED DECEMBER 1, 2016NEW ISSUE RATINGElectronic Bidding via Parity® Moody’s: " "Bank Interest Deduction EligibleBOOK-ENTRY-ONLY SYSTEM
In the opinion of Bond Counsel, under existing law (i) interest on the Bonds will be excludable from gross income of the holders thereof for purposes of federaltaxation and (ii) interest on the Bonds will not be a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations,all subject to the qualifications described herein under the heading "Tax Exemption." The Bonds and interest thereon are exempt from income taxation and ad valorem taxationby the Commonwealth of Kentucky and political subdivisions thereof (see "Tax Exemption" herein).
$420,000*SPENCER COUNTY SCHOOL DISTRICT FINANCE CORPORATION
SCHOOL BUILDING REFUNDING REVENUE BONDS,SERIES OF 2017
Dated: JANUARY 5, 2017 Due: as shown below
Interest on the Bonds is payable each August 1 and February 1, beginning August 1, 2017. The Bonds will matureas to principal on August 1, 2017, and each August 1 thereafter as shown below. The Bonds are being issued in Book-Entry-Only Form and will be available for purchase in principal amounts of $5,000 and integral multiples thereof.
Maturing Interest Reoffering Maturing Interest Reoffering
August 1 Amount Rate Yield CUSIP August 1 Amount Rate Yield CUSIP
2017 $45,000 % % 2022 $50,000 % %
2018 $45,000 % % 2023 $50,000 % %
2019 $45,000 % % 2024 $50,000 % %
2020 $45,000 % % 2025 $50,000 % %
2021 $40,000 % %
The Bonds are not subject to optional redemption prior to their stated maturity as described herein.
Notwithstanding the foregoing, the Corporation reserves the right to call, upon thirty (30) days notice, the Bondsin whole or in part on any date for redemption upon the total destruction by fire, lightning, windstorm or other hazard ofany of the building(s) constituting the Project(s) and apply casualty insurance proceeds to such purpose.
The Bonds constitute a limited indebtedness of the Spencer County School District Finance Corporation and arepayable from and secured by a pledge of the gross income and revenues derived by leasing the Project (as hereinafterdefined) on an annual renewable basis to the Spencer County Board of Education.
The Spencer County (Kentucky) School District Finance Corporation will until December 8, 2016 at 11:00 A.M.,E.S.T., receive competitive bids for the Bonds at the office of the Executive Director of the Kentucky School FacilitiesConstruction Commission, 229 West Main Street, Suite 102, Frankfort, Kentucky 40601.
*As set forth in the "Official Terms and Conditions of Bond Sale," the principal amount of Bonds soldto the successful bidder is subject to a Permitted Adjustment by increasing or decreasing the amount not to exceed$40,000.
PURCHASER'S OPTION: The Purchaser of the Bonds, within 24 hours of the sale, may specify to the FinancialAdvisor that any Bonds may be combined immediately succeeding sequential maturities into a Term Bond(s), bearing asingle rate of interest, with the maturities set forth above (or as may be adjusted as provided herein) being subject tomandatory redemption in such maturities for such Term Bond(s).
The Bonds will be delivered utilizing the BOOK-ENTRY-ONLY-SYSTEM administered by The Depository TrustCompany.
The Corporation deems this preliminary Official Statement to be final for purposes of the Securities and ExchangeCommission Rule 15c2-12(b)(1), except for certain information on the cover page hereof which has been omitted inaccordance with such Rule and which will be supplied with the final Official Statement.
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PRELIMINARY OFFICIAL STATEMENT
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SPENCER COUNTY, KENTUCKYBOARD OF EDUCATION
Debbie Herndon, ChairpersonJanet Bonham, Vice ChairSandy Clevenger, MemberLynn Shelburne, Member
Bart Stark, Member
Chuck Adams, Superintendent/Secretary
SPENCER COUNTY SCHOOL DISTRICTFINANCE CORPORATION
Debbie Herndon, PresidentJanet Bonham, Vice President
Sandy Clevenger, MemberLynn Shelburne, Member
Bart Stark, Member
Chuck Adams, SecretaryVictoria Goodlett, Treasurer
BOND COUNSEL
Steptoe & Johnson PLLCLouisville, Kentucky
FINANCIAL ADVISOR
Ross, Sinclaire & Associates, LLCLexington, Kentucky
PAYING AGENT AND REGISTRAR
U.S. Bank National AssociationLouisville, Kentucky
BOOK-ENTRY-ONLY-SYSTEM
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REGARDING USE OF THIS OFFICIAL STATEMENT
This Official Statement does not constitute an offering of any security other than the original offeringof the Spencer County School District Finance Corporation School Building Refunding Revenue Bonds, Seriesof 2017, identified on the cover page hereof. No person has been authorized by the Corporation or the Boardto give any information or to make any representation other than that contained in the Official Statement, andif given or made such other information or representation must not be relied upon as having been given orauthorized. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, andthere shall not be any sale of the Bonds by any person in any jurisdiction in which it is unlawful to make suchoffer, solicitation or sale.
The information and expressions of opinion herein are subject to change without notice, and neither thedelivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create anyimplication that there has been no change in the affairs of the Corporation or the Board since the date hereof.
Neither the Securities and Exchange Commission nor any other federal, state or other governmentalentity or agency, except the Corporation will pass upon the accuracy or adequacy of this Official Statementor approve the Bonds for sale.
The Official Statement includes the front cover page immediately preceding this page and allAppendices hereto.
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TABLE OF CONTENTS
Page
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Book-Entry-Only System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1The Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Kentucky School Facilities Construction Commission;
No Participation in this Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Biennial Budget for Period Ending June 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . 4Outstanding Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5The Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Registration, Payment and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5The Lease; Pledge of Rental Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 5
State Intercept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Verification of Mathematical Accuracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6The Plan of Refunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Purpose of the Prior Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Estimated Bond Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Estimated Use of Bond Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8District Student Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8State Support of Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Support Education Excellence in Kentucky (SEEK) . . . . . . . . . . . . . . . 8Capital Outlay Allotment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Facilities Support Program of Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . 9
Local Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Homestead Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Limitation on Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Local Thirty Cents Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Additional 15% Not Subject to Recall . . . . . . . . . . . . . . . . . . . . . . . . . 10Assessment Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Special Voted and Other Local Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11Local Tax Rates, Property Assessments, and Revenue Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Overlapping Bond Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11SEEK Allotment12State Budgeting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Potential Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Continuing Disclosure; Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Tax Exemption; Bank Qualified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Original Issue Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Absence of Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Approval of Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15No Legal Opinion Expressed as to Certain Matters . . . . . . . . . . . . . . . . . . . . . . 15Bond Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Approval of Official Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Demographic and Economic Data . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX AFinancial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX BOfficial Terms & Conditions of Bond Sale . . . . . . . . . . . . . . . . . . APPENDIX COfficial Bid Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX D
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OFFICIAL STATEMENT
Relating to the Issuance of
$420,000*
SPENCER COUNTY SCHOOL DISTRICT FINANCE CORPORATION
SCHOOL BUILDING REFUNDING REVENUE BONDS,
SERIES OF 2017
INTRODUCTION
The purpose of this Official Statement, which includes the cover page and Appendices hereto, is to setforth certain information pertaining to the Spencer County School District Finance Corporation (the"Corporation") School Building Refunding Revenue Bonds, Series of 2017 (the "Bonds").
The Bonds are being issued to (i) pay the accrued interest and refund on a current basis on January 12,2017, all of the outstanding Spencer County School District Finance Corporation School Building Revenue Bonds,Series of 2005, dated July 1, 2005 (the "2005 Bonds") maturing July 1, 2017 and thereafter (the "RefundedBonds"); and, (ii) pay the cost of the Bond issuance expenses (see "Plan of Refunding" herein). The Board hasdetermined that the plan of refunding the Refunded Bonds will result in considerable interest cost savings to theSpencer County School District (the "District") and is in the best interest of the District.
The Bonds are revenue bonds and constitute a limited indebtedness of the Corporation. The Bonds willbe secured by a pledge of the rental income derived by the Corporation from leasing the Projects (as hereinafterdefined) to the Spencer County Board of Education (the "Board") on a year to year basis (see "Security" herein).
All financial and other information presented in this Official Statement has been provided by the SpencerCounty Board of Education from its records, except for information expressly attributed to other sources. Thepresentation of financial and other information is not intended, unless specifically stated, to indicate future orcontinuing trends in the financial position or other affairs of the Board. No representation is made that pastexperience, as is shown by financial and other information, will necessarily continue or be repeated in the future.
This Official Statement should be considered in its entirety, and no one subject discussed should beconsidered more or less important than any other by reason of its location in the text. Reference should be madeto laws, reports or other documents referred to in this Official Statement for more complete informationregarding their contents.
Copies of the Bond Resolution authorizing the issuance of the Bonds and the Lease Agreement, datedJanuary 5, 2017, may be obtained at the office of Steptoe & Johnson PLLC, Bond Counsel, 700 N. HurstbourneParkway, Suite 115, Louisville, Kentucky 40222.
BOOK-ENTRY-ONLY-SYSTEM
The Bonds shall utilize the Book-Entry-Only-System administered by The Depository Trust Company("DTC").
The following information about the Book-Entry only system applicable to the Bonds has been suppliedby DTC. Neither the Corporation nor the Paying Agent and Registrar makes any representations, warranties orguarantees with respect to its accuracy or completeness.
DTC will act as securities depository for the Bonds. The Securities will be issued as fully-registeredsecurities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may berequested by an authorized representative of DTC.
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DTC, the world's largest depository, is a limited-purpose trust company organized under the New YorkBanking Law, a "banking organization" within the meaning of the New York Banking Law, a member of theFederal Reserve System, a "clearing corporation" within the meaning of the New York Uniform CommercialCode, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities ExchangeAct of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equityissues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC'sparticipants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among DirectParticipants of sales and other securities transactions in deposited securities, through electronic computerizedbook-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physicalmovement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers anddealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-ownedsubsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a numberof Direct Participants of DTC and Members of the National Securities Clearing Corporation, GovernmentSecurities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC,GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., theAmerican Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTCsystem is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trustcompanies, and clearing corporations that clear through or maintain a custodial relationship with a DirectParticipant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+.The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. Moreinformation about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which willreceive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Ownerswill not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected toreceive written confirmations providing details of the transaction, as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfersof ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and IndirectParticipants acting on behalf of Beneficial Owners.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registeredin the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by anauthorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede &Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge ofthe actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants towhose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct andIndirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participantsto Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governedby arrangements among them, subject to any statutory or regulatory requirements as may be in effect from timeto time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them ofnotices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposedamendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that thenominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. Inthe alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent andRegistrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC'spractice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to theBonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usualprocedures, DTC mails an Omnibus Proxy to the Corporation as soon as possible after the record date. TheOmnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accountsBonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and interest payments on the Bonds will be made to Cede & Co.,or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to creditDirect Participants' accounts upon DTC's receipt of funds and corresponding detail information from theCorporation or the Paying Agent and Registrar, on payable date in accordance with their respective holdingsshown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing
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instructions and customary practices, as is the case with Bonds held for the accounts of customers in bearerform or registered in "street name" and will be the responsibility of such Participant and not of DTC or itsnominee, the Paying Agent and Registrar or the Corporation, subject to any statutory or regulatory requirementsas may be in effect from time to time. Payment of redemption proceeds, distributions, and interest payments toCede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is theresponsibility of the Corporation or the Paying Agent and Registrar, disbursement of such payments to DirectParticipants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners willbe the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by givingreasonable notice the Corporation or the Paying Agent and Registrar. Under such circumstances, in the event thata successor depository is not obtained, Bond certificates are required to be printed and delivered. TheCorporation may decide to discontinue use of the system of book-entry transfers through DTC (or a successorsecurities depository). In that event, Bond certificates will be printed and delivered.
The information in this section concerning DTC and DTC's Book-Entry system has been obtained fromsources that the Corporation believes to be reliable but the Corporation takes no responsibility for the accuracythereof.
THE CORPORATION
The Corporation has been formed in accordance with the provisions of Sections 162.120 through162.300 and Section 162.385 of the Kentucky Revised Statutes ("KRS"), and KRS Chapter 273 and KRS 58.180,as a non-profit, non-stock corporation for the purpose of financing necessary school building facilities for andon behalf of the Board. Under the provisions of existing Kentucky law, the Corporation is permitted to act asan agency and instrumentality of the Board for financing purposes and the legality of the financing plan to beimplemented by the Board herein referred to has been upheld by the Kentucky Court of Appeals (Supreme Court)in the case of White v. City of Middlesboro, Ky. 414 S.W.2d 569.
Any bonds, notes or other indebtedness issued or contracted by the Corporation shall, prior to theissuance or incurrence thereon, be specifically approved by the Board. The members of the Board of Directorsof the Corporation are the members of the Board. Their terms expire when they cease to hold the office and anysuccessor members of the Board are automatically members of the Corporation upon assuming their publicoffices.
KENTUCKY SCHOOL FACILITIES CONSTRUCTION COMMISSION;NO PARTICIPATION IN THIS ISSUE
The Kentucky School Facilities Construction Commission (the "Commission") is an independentcorporate agency and instrumentality of the Commonwealth of Kentucky established pursuant to the provisionsof KRS Sections 157.611 through 157.640, as amended, repealed and reenacted (the "Act") for the purpose ofassisting local school districts in meeting the school construction needs of the Commonwealth in a manner whichwill ensure an equitable distribution of funds based upon unmet need.
The General Assembly of the Commonwealth adopted the State's Budget for the biennium ending June
30, 2018. Inter alia, the Budget provides $121,610,900 in FY 2016-17 and $134,544,300 in FY 2017-18 to pay
debt service on existing and future bond issues; $100,000,000 of the Commission's previous Offers of Assistance
made during the last biennium; and authorizes $91,000,000 in additional Offers of Assistance for the current
biennium to be funded in the Budget for the biennium ending June 30, 2018.
The 1986, 1988, 1990, 1992, 1994, 1996, 1998, 2000, 2003, 2005, 2006, 2008, 2010, 2012, 2014 and
2016 Regular Sessions of the Kentucky General Assembly appropriated funds to be used for debt service of
participating school districts. The appropriations for each biennium are shown in the following table:
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Biennium Appropriation
1986-88 $18,223,200
1988-90 14,050,700
1990-92 13,542,800
1992-94 3,075,300
1994-96 2,800,000
1996-98 4,996,000
1998-00 12,141,500
2000-02 8,100,000
2002-04 9,500,000
2004-06 14,000,000
2006-08 9,000,000
2008-10 10,968,000
2010-12 12,656,200
2012-14 8,469,200
2014-16 8,764,000
2016-18 23,019,400
Total $173,306,300
In addition to the appropriations for new financings as shown, appropriations subsequent to that for 1986
included additional funds to continue to meet the annual debt requirements for all bond issues involving
Commission participation issued in prior years.
BIENNIAL BUDGET FOR PERIOD ENDING JUNE 30, 2018
The Kentucky General Assembly, during its Regular Session, adopted a budget for the biennium ending
June 30, 2018 which was approved and signed by the Governor. Such budget was effective July 1, 2016.
OUTSTANDING BONDS
The following table shows the outstanding Bonds of the Board by the original principal amount of each
issue, the current principal outstanding, the amount of the original principal scheduled to be paid with the
corresponding interest thereon by the Board or the School Facilities Construction Commission, the approximate
interest range; and, the final maturity date of the Bonds:
Current Principal Principal Approximate
Bond Original Principal Assigned to Assigned to Interest Rate Final
Series Principal Outstanding Board Commission Range Maturity
2005 $755,000 $415,000 $755,000 $0 4.000% - 4.000% 2025
2007 $11,380,000 $9,195,000 $9,543,882 $1,836,118 4.250% 2017
2009-REF $5,940,000 $2,730,000 $4,584,287 $1,355,713 3.000% - 3.375% 2021
2011-REF $9,740,000 $8,920,000 $9,195,587 $544,413 2.000% - 2.625% 2024
2016-REF $10,055,000 $9,650,000 $8,641,030 $1,413,970 2.000% - 2.625% 2027
2016 $18,235,000 $18,235,000 $17,087,904 $1,147,096 2.000% - 3.000% 2036
Totals: $56,105,000 $49,145,000 $49,807,690 $6,297,310
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AUTHORITY
The Board of Directors of the Corporation has adopted a Bond Resolution which authorized among other
things:
i) the issuance of approximately $420,000 of Bonds subject to a permitted adjustment of $40,000;
ii) the advertisement for the public sale of the Bonds;
iii) the Official Terms and Conditions for the sale of the Bonds to the successful bidder; and,
iv) the President and Secretary of the Corporation to execute certain documents relative to the sale
and delivery of the Bonds.
THE BONDS
General
The Bonds will be dated January 5, 2017, will bear interest from that date as described herein, payable
semi-annually on August 1 and February 1 of each year, commencing August 1, 2017 and will mature as to
principal on August 1, 2017 and each August 1 thereafter in the years and in the principal amounts as set forth
on the cover page of this Official Statement.
Registration, Payment and Transfer
The Bonds are to be issued in fully registered form (both principal and interest). U. S. Bank National
Association, Louisville, Kentucky, the Bond Registrar and Paying Agent, shall remit interest on each semiannual
due date to each Registered Owner of record as of the 15th day of the month preceding the due date which shall
be Cede & Co., as the Nominee of The Depository Trust Company ("DTC"). Please see
"Book-Entry-Only-System" below.
Redemption
The Bonds are not subject to optional redemption prior to their stated maturity.
Notwithstanding the foregoing, the Corporation reserves the right, upon thirty (30) days notice, to call
the Bonds in whole or in part on any date at par for redemption upon the total destruction by fire, lightning,
windstorm or other hazard of any building constituting the Project and apply casualty insurance proceeds to such
purpose.
SECURITY
General
The Bonds are revenue bonds and constitute a limited indebtedness of the Corporation. The Bonds are
payable as to both principal and interest solely from the income and revenues derived from the leasing of the
Projects acquired and constructed from the Bond proceeds from the Corporation to the Board.
The Lease; Pledge of Rental Income
6
The Board has leased the school Project securing the Bonds for an initial period from January 5, 2017
through June 30, 2017 with the option in the Board to renew said Lease from year to year for one year at a time,
at annual rentals, sufficient in each year to enable the Corporation to pay, solely from the rental due under the
Lease, the principal and interest on all of the Bonds as same become due. The Lease provides further that so long
as the Board exercises its annual renewal options, its rentals will be payable according to the terms and provisions
of the Lease until August 1, 2025, the final maturity date of the Bonds. Under the Lease, the Corporation has
pledged the rental revenues to the payment of the Bonds. Provided, however, said lien and pledge are on parity
with similar liens and pledges securing the Corporation’s School Building Revenue Bonds previously issued to
improve the building(s) in which the Project is located (the “Parity Bonds”).
STATE INTERCEPT
Under the terms of the Lease, and any renewal thereof, the Board has agreed so long as the Bonds remain
outstanding, and in conformance with the intent and purpose of Section 157.627(5) of the Act and KRS
160.160(5), in the event of a failure by the Board to pay the rentals due under the Lease, and unless sufficient
funds have been transmitted to the Paying Agent, or will be so transmitted, for paying said rentals when due, the
Board has granted under the terms of the Lease and Participation Agreement to the Corporation the right to notify
and request the Kentucky Department of Education to withhold from the Board a sufficient portion of any
undisbursed funds then held, set aside, or allocated to the Board and to request said Department or Commissioner
of Education to transfer the required amount thereof to the Paying Agent for the payment of such rentals.
VERIFICATION OF MATHEMATICAL ACCURACY
AMTEC, will verify from the information provided to them the mathematical accuracy as of the date of
the closing of the Bonds of (1) the computations contained in the provided schedules to determine that the
anticipated receipts from the securities and cash deposits listed in the Financial Advisor's schedules, to be held
in escrow, will be sufficient to pay, when due, the principal, interest and call premium payment requirements,
if any, of the Prior Bonds, and (2) the computations of yield on both the securities and the Bonds contained in
the provided schedules used by Bond Counsel in its determination that the interest on the Bonds is not includable
in gross income for federal income tax purposes. AMTEC will express no opinion on the assumptions provided
to them, nor as to the exemption from taxation of the interest on the Bonds.
THE PLAN OF REFUNDING
A sufficient amount of the proceeds of the Bonds at the time of delivery will be deposited into the Prior
Bond Fund for the Refunded Bonds. The Prior Bond Fund deposit is intended to be sufficient to (i) pay the
accrued interest and refund on a current basis on January 12, 2017, all of the Spencer County School District
Finance Corporation School Building Revenue Bonds, Series of 2005, dated July 1, 2005 maturing July 1, 2017
and thereafter (the "Refunded Bonds"); and, (ii) pay the cost of the Bond issuance expenses (see "Plan of
Refunding" herein). The Board has determined that the plan of refunding the Refunded Bonds will result in
considerable interest cost savings to the Spencer County School District (the "District") and is in the best interest
of the District.
Any investments purchased for the Prior Bond Fund shall be limited to (i) direct Obligations of or
Obligations guaranteed by the United States government, or (ii) Obligations of agencies or corporations of the
United States as permitted under KRS 66.480(1)(b) and (c) or (iii) Certificates of Deposit of FDIC banks fully
collateralized by direct Obligations of or Obligations guaranteed by the United States.
7
The Plan of Refunding the Bonds of the Prior Issue as set out in the Preliminary Official Statement is
tentative as to what Bonds of the Prior Issue shall be refunded and will not be finalized until the sale of the
Refunding Bonds.
PURPOSE OF THE PRIOR BONDS
The Refunded Bonds were issued by the Corporation for the purpose of providing funds to finance
renovations and additions to Taylorsville Elementary school (the “Project”).
ESTIMATED BOND DEBT SERVICE
The following table shows by fiscal year the current bond payments of the Board. The plan of financing
provides for the Board to meet 100% of the debt service of the Bonds.
Fiscal Current Total
Year Local -----2017 Series Refunding Revenue Bonds (100% Local) ----- Local
Ending Bond Bond
June 30 Payments Principal Interest Total Payments
2017 $2,487,302 $2,487,302
2018 $2,520,907 $45,000 $10,165 $55,165 $2,520,272
2019 $2,526,709 $45,000 $8,550 $53,550 $2,526,059
2020 $2,524,478 $45,000 $7,650 $52,650 $2,519,628
2021 $2,533,648 $45,000 $6,750 $51,750 $2,529,698
2022 $2,532,618 $40,000 $5,900 $45,900 $2,529,518
2023 $2,529,653 $50,000 $5,000 $55,000 $2,527,453
2024 $2,529,358 $50,000 $3,750 $53,750 $2,527,908
2025 $2,531,345 $50,000 $2,250 $52,250 $2,530,395
2026 $2,546,596 $50,000 $750 $50,750 $2,541,246
2027 $2,542,508 $2,542,508
2028 $2,540,102 $2,540,102
2029 $2,455,896 $2,455,896
2030 $2,472,477 $2,472,477
2031 $2,424,590 $2,424,590
2032 $2,366,139 $2,366,139
2033 $2,317,540 $2,317,540
2034 $2,263,489 $2,263,489
2035 $2,204,140 $2,204,140
2036 $2,154,639 $2,154,639
Totals: $49,004,134 $420,000 $50,765 $470,765 $48,980,999
Note: Numbers are rounded to the nearest $1.00. Estimated Net Interest Cost of 2.1865387%
8
ESTIMATED USE OF BOND PROCEEDS
The table below shows the estimated sources of funds and uses of proceeds of the Bonds, other than
any portions thereof representing accrued interest:
Sources:
Par Amount of Bonds $420,000.00
Total Sources $420,000.00
Uses:
Deposit to Prior Bond Fund $401,050.00
Underwriter's Discount (1%) 4,200.00
Cost of Issuance 14,750.00
Total Uses $420,000.00
DISTRICT STUDENT POPULATION
Selected school census and average daily attendance for the Spencer County School District is as
follows:
Average Daily Average Daily
Year Attendance Year Attendance
1989-90 1,254.3 2002-03 2,121.6
1990-91 1,247.1 2003-04 2,030.0
1991-92 1,260.3 2004-05 2,155.3
1992-93 1,330.9 2005-06 2,204.0
1993-94 1,382.4 2006-07 2,339.6
1994-95 1,449.7 2007-08 2,418.7
1995-96 1,516.6 2008-09 2,465.2
1996-97 1,535.9 2009-10 2,496.3
1997-98 1,577.2 2010-11 2,518.3
1998-99 1,577.2 2011-12 2,512.5
1999-00 1,808.5 2012-13 2,536.7
2000-01 1,877.2 2013-14 2,579.4
2001-02 1,992.7 2014-15 2,585.0
2015-16 2,574.5
______________
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Source: Kentucky State Department of Education.
STATE SUPPORT
Support Education Excellence in Kentucky (SEEK). In determining the cost of the program to Support
Education Excellence in Kentucky (SEEK), the statewide guaranteed base funding level is computed by dividing
the amount appropriated by the prior year's statewide average daily attendance. The SEEK fund is a guaranteed
amount of money per pupil in each school district of Kentucky. The current SEEK allotment is $3,866 per pupil.
The $100 capital outlay allotment per each average daily attendance is included within the guaranteed amounts.
Each district's base funding from the SEEK program is adjusted for the number of at-risk students, the number
and types of exceptional children in the district, and cost of transporting students from and to school in the
district.
Capital Outlay Allotment. The per pupil capital outlay allotment for each district from the public school
fund and from local sources shall be kept in a separate account and may be used by the district only for capital
outlay projects approved by the State Department of Education. These funds shall be used for the following
capital outlay purposes:
a. For direct payment of construction costs.
b. For debt service on voted and funding bonds.
c. For payment or lease-rental agreements under which the board will eventually acquire
ownership of the school plant.
d. For retirement of any deficit resulting from over-expenditure for capital construction, if such
deficit resulted from certain declared emergencies.
e. As a reserve fund for the above named purposes, to be carried forward in ensuing budgets.
The allotment for each school board of education in the Commonwealth for fiscal year 1978-79 was
$1,800 per classroom unit. The 1979 Session of the Kentucky General Assembly approved increases in this
allotment in 1979-80 to $1,900 per classroom unit. This rate remained unchanged in 1980-81. The 1981 Session
of the Kentucky General Assembly decreased the allotment per classroom to $1,800 and this allotment rate did
not change from the 1981-82 rate, until the 1990-91 school year. Beginning with 1990-91, the Capital Outlay
allotment for each district is based on $100 per average daily attendance.
The following table shows the computation of the capital outlay allotment for the SPENCER County
School District for certain preceding school years. Beginning 1990-91, the allotment is based on average daily
attendance as required by law.
Capital Capital
Outlay Outlay
Year Allotment Year Allotment
1990-91 124,710.0 2003-04 203,000.0
1991-92 126,030.0 2004-05 215,530.0
1992-93 133,090.0 2005-06 220,400.0
1993-94 138,240.0 2006-07 233,960.0
1994-95 144,970.0 2007-08 241,870.0
1995-96 151,660.0 2008-09 246,523.0
1996-97 153,590.0 2009-10 249,625.0
1997-98 157,720.0 2010-11 251,828.0
1998-99 157,720.0 2011-12 251,247.0
1999-00 180,850.0 2012-13 253,669.0
2000-01 187,720.0 2013-14 257,937.0
2001-02 199,270.0 2014-15 258,504.0
2002-03 212,160.0 2015-16 257,453.0
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If the school district has no capital outlay needs, upon approval from the State, the funds can be used
for school plant maintenance, repair, insurance on buildings, replacement of equipment, purchase of school buses
and purchase of modern technological equipment for educational purposes. If any district has a special levy for
capital outlay or debt service that is equal to the capital outlay allotment or a proportionate fraction thereof, and
spends the proceeds of the levy for eligible purposes, the State may authorize the district to use all or a
proportionate fraction of its capital outlay allotment for current expenses (school districts which use capital outlay
allotments to meet current expenses are not eligible to participate in the School Facilities Construction
Commission funds).
Facilities Support Program of Kentucky. School districts may be eligible to participate in the Facilities
Support Program of Kentucky (FSPK), subject to the following requirements:
1) The district must have unmet needs as set forth and approved by the State Department of
Education in a School Facilities Plan;
2) The district must commit to establish an equivalent tax rate of at least 5 cents, in addition to the
30 cents minimum current equivalent tax rate; and,
3) The new revenues generated by the 5 cent addition, must be placed in a restricted account for
school building construction bonding.
LOCAL SUPPORT
Homestead Exemption. Section 170 of the Kentucky Constitution was amended at the General Election
held November 2, 1971, to exempt from property taxes $6,500 of value of single unit residential property of
taxpayers 65 years of age or older. The 1972 General Assembly amended KRS Chapter 132 to permit counties
and school districts to adjust their local tax revenues lost through the application of this Homestead Exemption.
The "Single Unit" qualification has been enlarged to subsequent sessions of the General Assembly to provide that
such exemption shall apply to such property maintained as the permanent resident of the owner and the dollar
amount has been construed to mean $6,500 in terms of the purchasing power of the dollar in 1972. Every two
years thereafter, if the cost of living index of the U.S. Department of Labor has changed as much as 1%, the
maximum exemption shall be adjusted accordingly. Under the cost of living formula, the maximum was
increased to $36,900 effective January 1, 2015.
Limitation on Taxation. The 1979 Special Session of the Kentucky General Assembly enacted House
Bill 44 which provides that no school district may levy a general tax rate, voted general tax rate, or voted building
tax rate which would generate revenues that exceeds the previous years revenues by four percent (4%).
The 1990 Regular Session of the Kentucky General Assembly in enacting the "School Reform" legislative
package amended the provisions of KRS 160.470 which prohibited school districts from levying ad valorem
property taxes which would generate revenues in excess of 4% of the previous year's revenues without said levy
subject to recall to permit exceptions to the referendum under (1) KRS 160.470(12) [a new section of the statute]
and (2) an amended KRS 157.440.
Under KRS 160.470(12)(a) for fiscal years beginning July 1, 1990 school districts are required to levy
a "minimum equivalent tax rate" of thirty cents ($.30) for general school purposes. The equivalent tax rate is
defined as the rate which results when the income collected during the prior year from all taxes (including
occupational or utilities) levied by the district for school purposes divided by the total assessed value of property
plus the assessment for motor vehicles certified by the State Revenue Cabinet. Failure to levy the minimum
equivalent rate subjects the board of the district to removal.
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The exception provided by KRS 157.440(1)(a) permits school districts to levy an equivalent tax rate as
defined in KRS 160.470(12)(a) which will produce up to 15% of those revenues guaranteed by the program to
support education excellence in Kentucky. Levies permitted by this section of the statute are not subject to public
hearing or recall provisions as set forth in KRS 160.470.
Local Thirty Cents Minimum. Effective for school years beginning after June 30, 1990, the board of
education of each school district shall levy a minimum equivalent tax rate of thirty cents ($0.30) for general
school purposes. If a board fails to comply, its members shall be subject to removal from office for willful
neglect of duty.
Additional 15% Not Subject to Recall. Effective with the school year beginning July 1, 1990, each
school district may levy an equivalent tax rate which will produce up to 15% of those revenues guaranteed by
the SEEK program. Effective with the 1990-91 school year, the State will equalize the revenue generated by this
levy at one hundred fifty percent (150%) of the statewide average per pupil equalized assessment. For 1993-94
and thereafter, this level is set at $225,000. The additional 15% rate levy is not subject to the public hearing or
recall provisions.
Assessment Valuation. No later than July 1, 1994, all real property located in the state and subject to
local taxation shall be assessed at one hundred percent (100%) of fair cash value.
Special Voted and Other Local Taxes. Any district may, in addition to other taxes for school purposes,
levy not less than four cents nor more than twenty cents on each one hundred dollars ($100) valuation of
property subject to local taxation, to provide a special fund for the purchase of sites for school buildings and the
erection, major alteration, enlargement, and complete equipping of school buildings. In addition, districts may
levy taxes on tangible and intangible property and on utilities, except generally any amounts of revenues generated
above that provided for by House Bill 44 is subject to voter recall.
Local Tax Rates, Property Assessments and Revenue Collections
Combined Total Property
Tax Equivalent Property Revenue
Year Rate Assessment Collections
1991-92 56 160,308,981 897,730
1992-93 54.5 171,361,291 933,919
1993-94 54.6 190,704,063 1,041,244
1994-95 53.1 209,052,273 1,110,068
1995-96 54 256,662,441 1,385,977
1996-97 54 289,510,188 1,563,355
1997-98 56.7 314,816,172 1,785,008
1998-99 56.4 345,149,998 1,946,646
1999-00 55.4 417,019,971 2,310,291
2000-01 54.2 484,713,062 2,627,145
2001-02 55.4 549,516,663 3,044,322
2002-03 54.6 619,631,348 3,383,187
2003-04 54.6 696,102,680 3,800,721
2004-05 59.2 756,246,951 4,476,982
2005-06 59.9 833,396,710 4,992,046
2006-07 59.2 938,157,690 5,553,894
2007-08 59.9 1,066,115,600 6,386,032
2008-09 58 1,115,675,993 6,470,921
2009-10 58 1,111,668,431 6,447,677
2010-11 61 1,133,002,762 6,911,317
2011-12 63.4 1,154,726,606 7,320,967
12
2012-13 65.4 1,173,415,075 7,674,135
2013-14 65.8 1,175,180,758 7,732,689
2014-15 67.1 1,190,235,841 7,986,482
2015-16 65.8 1,217,155,254 8,008,882
Overlapping Bond Indebtedness
The following table shows any other overlapping bond indebtedness of the Spencer County School
District or other issuing agency within the County as reported by the State Local Debt Officer for the period
ending June 30, 2013.
Original Amount Current
Principal of Bonds Principal
Issuer Amount Redeemed Outstanding
County of Spencer
General Obligation $644,000 $455,000 $189,000
Improvement Project Revenue $250,000 $80,000 $170,000
Equipment Renewable $26,823 $22,000 $4,823
City of Taylorsville
Water & Sewer Revenue $3,935,000 $651,500 $3,283,500
Airport Public Corporation $164,000 $51,000 $113,000
KIA Loan $1,181,076 $1,027,505 $153,571
Improvement Project Revenue $3,302,000 $138,000 $3,164,000
Special Districts
Spencer County Fire District $594,000 $59,859 $534,141
Totals: $10,096,899 $2,484,864 $7,612,035
______________
Source: 2013 Kentucky Local Debt Report.
SEEK Allotment
The Board has reported the following information as to the SEEK allotment to the District, and as
provided by the State Department of Education.
Base Local Total State &
Funding Tax Effort Local Funding
2014-15 SEEK 11,020,288 7,986,482 19,006,770
2013-14 SEEK 10,653,779 7,732,689 18,386,468
2012-13 SEEK 10,231,997 7,674,135 17,906,132
2011-12 SEEK 10,104,064 7,320,967 17,425,031
2010-11 SEEK 9,382,308 6,911,317 16,293,625
2009-10 SEEK 9,150,764 6,447,677 15,598,441
2008-09 SEEK 9,855,418 6,470,921 16,326,339
2007-08 SEEK 9,759,576 6,386,032 16,145,608
2006-07 SEEK 8,905,486 5,553,894 14,459,380
2005-06 SEEK 8,443,891 4,992,046 13,435,937
2004-05 SEEK 7,759,137 4,476,982 12,236,119
2003-04 SEEK 7,148,595 3,800,721 10,949,316
2002-03 SEEK 6,934,064 3,383,187 10,317,251
2001-02 SEEK 6,970,763 3,044,322 10,015,085
2000-01 SEEK 6,580,700 2,627,145 9,207,845
1999-00 SEEK 6,225,000 2,310,291 8,535,291
1998-99 SEEK 5,585,747 1,946,646 7,532,393
1997-98 SEEK 5,292,104 1,785,008 7,077,112
13
1996-97 SEEK 5,212,168 1,563,355 6,775,523
1995-96 SEEK 4,944,505 1,385,977 6,330,482
1994-95 SEEK 4,634,463 1,110,068 5,744,531
1993-94 SEEK 4,142,757 1,041,244 5,184,001
1992-93 SEEK 3,850,019 933,919 4,783,938
1991-92 SEEK 3,606,923 897,730 4,504,653
(1) Support Education Excellence in Kentucky (SEEK) replaces the minimum foundation program and
power equalization funding. Capital Outlay is now computed at $100 per average daily attendance
(ADA). Capital Outlay is included in the SEEK base funding.
(2) The Board established a current equivalent tax rate (CETR) of $0.658 for FY 2015-16. The "equivalent
tax rate" is defined as the rate which results when the income from all taxes levied by the district for
school purposes is divided by the total assessed value of property plus the assessment for motor
vehicles certified by the Commonwealth of Kentucky Revenue Cabinet.
State Budgeting Process
i) Each district board of education is required to prepare a general school budget on forms
prescribed and furnished by the Kentucky Board of Education, showing the amount of money
needed for current expenses, debt service, capital outlay, and other necessary expenses of the
school during the succeeding fiscal year and the estimated amount that will be received from
all sources.
ii) By September 15 of each year, after the district receives its tax assessment data from the
Department of Revenue and the State Department of Education, 3 copies of the budget are
forwarded to the State Department for approval or disapproval.
iii) The State Department of Education has adopted a policy of disapproving a school budget if it
is financially unsound or fails to provide for:
a) payment of maturing principal and interest on any outstanding voted school
improvement bonds of the district or payment of rental in connection with any
outstanding school building revenue bonds issued for the benefit of the school district;
or
b) fails to comply with the law.
POTENTIAL LEGISLATION
No assurance can be given that any future legislation, including amendments to the Code, if enacted into
law, or changes in interpretation of the Code, will not cause interest on the Refunding Bonds to be subject,
directly or indirectly, to federal income taxation, or otherwise prevent owners of the Refunding Bonds from
realizing the full current benefit of the tax exemption of such interest. In addition, current and future legislative
proposals, if enacted into law, may cause interest on state or local government bonds (whether issued before,
on the date of, or after enactment of such legislation) to be subject, directly or indirectly, to federal income
taxation by, for example, changing the current exclusion or deduction rules to limit the amount of interest on such
bonds that may currently be treated as tax exempt by certain individuals. Prospective purchasers of the Refunding
Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation.
Further, no assurance can be given that the introduction or enactment of any such future legislation, or
any action of the IRS, including but not limited to regulation, ruling, or selection of the Refunding Bonds for audit
examination, or the course or result of any IRS examination of the Refunding Bonds or obligations which present
similar tax issues, will not affect the market price for the Refunding Bonds.
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CONTINUING DISCLOSURE; EXEMPTION
As a result of the principal amount of the Bonds being less than $1,000,000, the Corporation and the
Board will not be subject to the provisions of the Municipal Securities Disclosure Rules set forth in Securities
and Exchange Commission Rule 15c2-12 (the “Rule”) with respect to the Bonds.
Financial information regarding the Board may be obtained from Superintendent, Spencer County Board
of Education, 207 W. Main St., Taylorsville, Kentucky, 40071 Telephone (502) 477-3250.
TAX EXEMPTION; BANK QUALIFIED
Bond Counsel is of the opinion that:
(A) The Refunding Bonds and the interest thereon are exempt from income and ad valorem taxation
by the Commonwealth of Kentucky and all of its political subdivisions.
(B) The interest income from the Refunding Bonds is excludable from the gross income of the
recipient thereof for Federal income tax purposes under existing law; provided, that the corporate entities noted
below are advised of certain tax consequences as follows:
(1) In the computation of the corporate minimum tax, earnings and profits may include
otherwise tax-exempt interest on the Refunding Bonds; this provision applies to corporations only.
(2) Property and casualty insurance companies may be denied certain loss reserve
deductions to the extent of otherwise tax-exempt interest on the Refunding Bonds.
(C) As a result of designations and certifications by the Board and the Corporation, indicating the
issuance of less than $10,000,000 of tax-exempt obligations during the calendar year ending December 31, 2017,
the Refunding Bonds are "qualified tax-exempt obligations" within the meaning of the Internal Revenue Code of
1986, as amended.
(D) The interest income from the Refunding Bonds is excludable from the gross income of the
recipient thereof for Federal income tax purposes under existing law for individuals; however, said income must
be included in the calculation of "modified adjusted gross income" in the determination of whether and to what
extent Social Security benefits are subject to Federal income taxation.
The Corporation will provide the purchaser the customary no-litigation certificate, and the final approving
Legal Opinions of Steptoe & Johnson PLLC, Bond Counsel and Special Tax Counsel, Louisville, Kentucky
approving the legality of the Bonds. These opinions will accompany the Bonds when delivered, without expenses
to the purchaser.
Original Issue Premium
Certain of the Bonds are being initially offered and sold to the public at a premium (“Acquisition
Premium” from the amounts payable at maturity thereon. "Acquisition Premium" is the excess of the cost of a
bond over the stated redemption price of such bond at maturity or, for bonds that have one or more earlier call
dates, the amount payable at the next earliest call date. The Bonds that bear an interest rate that is higher than the
yield (as shown on the cover page hereof), are being initially offered and sold to the public at an Acquisition
Premium (the "Premium Bonds"). For federal income tax purposes, the amount of Acquisition Premium on each
bond the interest on which is excludable from gross income for federal income tax purposes ("tax-exempt
bonds") must be amortized and will reduce the bondholder's adjusted basis in that bond. However, no amount
of amortized Acquisition Premium on tax-exempt bonds may be deducted in determining bondholder's taxable
income for federal income tax purposes. The amount of any Acquisition Premium paid on the Premium Bonds,
15
or on any of the Bonds, that must be amortized during any period will be based on the "constant yield" method,
using the original bondholder's basis in such bonds and compounding semiannually. This amount is amortized
ratably over that semiannual period on a daily basis.
Holders of any Bonds, including any Premium Bonds, purchased at an Acquisition Premium should
consult their own tax advisors as to the actual effect of such Acquisition Premium with respect to their own tax
situation and as to the treatment of Acquisition Premium for state tax purposes.
Original Issue Discount
Certain of the Bonds (the "Discount Bonds") are being initially offered and sold to the public at a discount
("OID") from the amounts payable at maturity thereon. OID is the excess of the stated redemption price of a
bond at maturity (the face amount) over the "issue price" of such bond. The issue price is the initial offering price
to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or
wholesalers) at which a substantial amount of bonds of the same maturity are sold pursuant to that initial offering.
For federal income tax purposes, OID on each bond will accrue over the term of the bond. The amount accrued
will be based on a single rate of interest, compounded semiannually (the "yield to maturity") and, during each
semi-annual period, the amount will accrue ratably on a daily basis. The OID accrued during the period that an
initial purchaser of a Discount Bond at its issue price owns it is added to the purchaser's tax basis for purposes
of determining gain or loss at the maturity, redemption, sale or other disposition of that Discount Bond. In
practical effect, accrued OID is treated as stated interest, that is, as excludible from gross income for federal
income tax purposes.
In addition, original issue discount that accrues in each year to an owner of a Discount Bond is included
in the calculation of the distribution requirements of certain regulated investment companies and may result in
some of the collateral federal income tax consequences discussed above. Consequently, owners of any Discount
Bond should be aware that the accrual of original issue discount in each year may result in an alternative minimum
tax liability, additional distribution requirements or other collateral federal income tax consequences although the
owner of such Discount Bond has not received cash attributable to such original issue discount in such year.
Holders of Discount Bonds should consult their own tax advisors as to the treatment of OID and the tax
consequences of the purchase of such Discount Bonds other than at the issue price during the initial public
offering and as to the treatment of OID for state tax purposes.
ABSENCE OF MATERIAL LITIGATION
There is no litigation presently pending against the Corporation or the District, nor to the knowledge of
the officials of the Corporation or the District is there any litigation threatened, which questions or affects the
validity of the Bonds or any proceedings or transactions relating to the issue, sale and delivery thereof.
APPROVAL OF LEGALITY
Legal matters incident to the authorization and issuance of the Bonds are subject to the approving legal
opinion of Steptoe & Johnson PLLC, Bond Counsel. The form of the approving legal opinion of Bond Counsel
will appear on each printed Bond.
NO LEGAL OPINION EXPRESSED AS TO CERTAIN MATTERS
Bond Counsel has reviewed the information contained in the Official Statement describing the Bonds and
the provisions of the Bond Resolution and related proceedings authorizing the Bonds, but Bond Counsel has not
reviewed any of the financial data, computations, tabulations, balance sheets, financial projections, and general
16
information concerning the Corporation or District, and expresses no opinion thereon, assumes no responsibility
for same and has not undertaken independently to verify any information contained herein.
BOND RATING
As noted on the cover page of this Official Statement, Moody’s Investors Service has given the Bonds
the indicated rating. Such rating reflects only the respective views of such organization. Explanations of the
significance of the rating may be obtained from the rating agency. There can be no assurance that such rating
will be maintained for any given period of time or will not be revised or withdrawn entirely by the rating agency,
if in their judgement circumstances so warrant. Any such downward revision or withdrawal of such rating may
have an adverse effect on the market price of the Bonds.
FINANCIAL ADVISOR
Prospective bidders are advised that Ross, Sinclaire & Associates, LLC ("Ross Sinclaire") has been
employed as Financial Advisor in connection with the issuance of the Bonds. Ross Sinclaire's fee for services
rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery thereof. Bidders may
submit a bid for the purchase of the Bonds at the time of the advertised public sale, either individually or as a
member of a syndicate organized to submit a bid for the purchase of the Bonds.
APPROVAL OF OFFICIAL STATEMENT
The Corporation has approved and caused this "Official Statement" to be executed and delivered by its
President. In making this "Official Statement" the Corporation relied upon information furnished to it by the
Board of Education of the Spencer County School District and does not assume any responsibility as to the
accuracy or completeness of any of the information in this Official Statement except as to copies of documents
denominated "Official Terms and Conditions" and "Bid Form." The financial information supplied by the Board
of Education is represented by the Board of Education to be correct. The Corporation deems this preliminary
Official Statement to be final for purposes of Securities Exchange Commission Rule 15c2-12(b)(1) as qualified
by the cover hereof.
No dealer, broker, salesman, or other person has been authorized by the Corporation, the Spencer County
Board of Education or the Financial Advisor to give any information or representations, other than those contained
in this Official Statement, and if given or made, such information or representations must not be relied upon as
having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or
the solicitation of any person in any jurisdiction in which it is unlawful for such person to make such offer,
solicitation or sale. Except when otherwise indicated, the information set forth herein has been obtained from
the Kentucky Department of Education and the Spencer County School District and is believed to be reliable;
however, such information is not guaranteed as to accuracy or completeness by, and is not to be construed as
a representation by the Financial Advisor or by Counsel. The delivery of this Official Statement at any time does
not imply that information herein is correct as of any time subsequent to the date hereof.
This Official Statement does not, as of its date, contain any untrue statement of a material fact or omit
to state a material fact which should be included herein for the purpose for which the Official Statement is to be
used or which is necessary in order to make the statements contained herein, in the light of the circumstances
under which they were made, not misleading in any material respect.
By /s/
President
17
By /s/
Secretary
APPENDIX A
Spencer County School District Finance Corporation
School Building Refunding Revenue Bonds
Series of 2017
Demographic and Economic Data
(A-1)
SPENCER COUNTY, KENTUCKY
Taylorsville, the county seat of Spencer County, is located in the Blue Grass Region of north-central
Kentucky. The city is located 32 miles southeast of Louisville, Kentucky, and 60 miles west of Lexington,
Kentucky. Taylorsville had an estimated 2013 population of 791.
Spencer County, with a rolling to hilly terrain, has a land area of 185 square miles. The county had a
population of 17,894 persons in 2015. Spencer County’s most prominent feature is Taylorsville Lake, a 3,050-
acre impoundment of the Salt River. Taylorsville Lake was created by the U.S. Army Corps of Engineers and
has been developed as a public recreation area and state park.
The Economic Framework
The total number of people employed in Spencer County in 2013 averaged 1,766. Manufacturing firms
in the county reported 18 employees; trade, transportation and utilities provided 306 jobs; 334 people were
employed in service occupations; public administration accounted for 150 employees; contract construction firms
provided 118 jobs; and finance, insurance and real estate accounted for 91 jobs.
Labor Supply
There is a current estimated labor supply of 45,418 persons available for industrial jobs in the labor market
area. In addition, from 2014 through 2017, 54,815 young persons in the area will become 18 years of age and
potentially available for industrial jobs.
Transportation
Taylorsville is served by Kentucky Highways 44 and 55, both “AAA”-rated trucking highways. Interstate
64 and the Blue Grass Parkway are both accessible within 16 miles of Taylorsville, via Kentucky 55. Sixteen
trucking companies offer interstate and/or intrastate service to Taylorsville. Taylorsville is located 20 miles
southwest of rail freight lines operated by CSX Transportation and the Norfolk Southern Corporation. The
nearest scheduled commercial airline service is available at the Louisville International Airport, 28 miles northwest
of Taylorsville.
Power and Fuel
LG&E Energy Corp. provides electric power to Taylorsville and parts of Spencer County. East Kentucky
Power Cooperative provide electric power to the remainder of Spencer County. Natural gas service is provided
by LG&E Energy Corp.
LOCAL GOVERNMENT
Structure
The City of Taylorsville is served by a mayor and four commissioners. Spencer County is served by
a county judge/executive and six magistrates.
Planning and Zoning
Joint agency - Taylorsville-Spencer County Joint Planning and Zoning Commission
Participating cities - Taylorsville
Zoning enforced - All areas
Subdivision regulations enforced - All areas
(A-2)
Mandatory state codes enforced - Kentucky Plumbing Code, National Electric Code, Kentucky Boiler
Regulations and Standards, Kentucky Building Code (modeled after BOCA code)
Property Taxes
The Kentucky Constitution requires the state to tax all classes of taxable property, and state statutes allow
local jurisdictions to tax only a few classes. All locally taxed property is subject to county taxes, and school
district taxes (either a county school district or an independent school district). Property located inside of city
limits may also be subject to city property taxes.
Special local taxing jurisdictions (fire protection districts, watershed districts, and sanitation districts) levy
taxes within their operating areas (usually a small portion of community or county).
Property assessments in Kentucky are at 100% fair cash value. Accounts receivable are taxed at 85% of
face value.
LABOR MARKET STATISTICS
The Taylorsville Labor Market Area includes Spencer County and the adjoining Kentucky counties of
Anderson, Bullitt, Jefferson, Nelson and Shelby.
Population
Area 2013 2014 2015
Labor Market Area 1,037,471 1,044,157 1,049,894
Taylorsville 1,013 790 1,028
Spencer County 17,551 17,688 17,894
________________
Source: U.S. Department of Commerce, Bureau of the Census.
Population Projections
Area 2025 2030 2035
Spencer County 27,189 30,861 34,587
__________________
Source: Kentucky State Data Center, University of Louisville and Kentucky Cabinet for Economic Development.
EDUCATION
Public Schools
Spencer County
Total Enrollment (2014-2015) 2,811
Pupil-Teacher Ratio 17.5 - 1
(A-3)
Vocational-Technical Training
Kentucky Tech schools are operated by the Cabinet for Workforce Development and provide secondary
(Sec) and post-secondary (P/S) vocational-technical training.
Enrollment
Technical School Location (2014-15)
Shelby County ATC Shelbyville, KY 658
Nelson County ATC Bardstown, KY 364
Bullitt County ATC Shepherdsville, KY 165
Oldham County ATC Buckner, KY 337
Franklin County Career & Tech Frankfort, KY 763
Harrodsburg ATC Harrodsburg, KY 238
Marion County ATC Lebanon, KY 594
Jessamine Career & Tech Nicholasville, KY 1,755
Carroll County ATC Carrollton, KY 390
Meade County ATC Brandenburg, KY 385
Garrard County ATC Lancaster, KY 250
Lincoln County ATC Stanford, KY 254
Green County ATC Greensburg, KY 508
Casey County ATC Liberty, KY 390
Area Colleges and Universities
Enrollment
Institution Location (Fall 2014)
Bellarmine University Louisville, KY 3,609
Spalding University Louisville, KY 2,311
University of Louisville Louisville, KY 21,561
Kentucky State University Frankfort, KY 1,895
Midway College Midway, KY 1,140
Asbury College Wilmore, KY 1,879
Centre College Danville, KY 1,387
Georgetown College Georgetown, KY 1,262
Campbellsville University Campbellsville, KY 3,427
Transylvania University Lexington, KY 1,014
University of Kentucky Lexington, KY 29,203
FINANCIAL INSTITUTIONS
Institution Total Assets Total Deposits
The Peoples Bank $109,757,000 $93,135,000
__________________
Source: McFadden American Financial Directory, January - June 2016 Edition.
APPENDIX B
Spencer County School District Finance Corporation
School Building Refunding Revenue Bonds
Series of 2017
Audited Financial Statement ending June 30, 2016
SPENCER COUNTY SCHOOL DISTRICT
BASIC FINANCIAL STATEMENTS, SUPPLEMENTARY INFORMATION, AND
REPORTS OF INDEPENDENT AUDITORS
YEAR ENDED JUNE 30, 2016
SPENCER COUNTY SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2016
Page Report of Independent Auditors .................................................................................................................... 1 - 3 Management’s Discussion and Analysis ................................................................................................... 4 - 10 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ............................................................................................................................... 11 Statement of Activities ..................................................................................................................................... 12 Fund Financial Statements: Balance Sheet – Governmental Funds .......................................................................................................... 13 Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position ...................................................................................................... 14 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ...................................................................................................... 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................................................................................................................................. 16 Statement of Net Position – Proprietary Funds .............................................................................................. 17 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds ........................................................................................................................................ 18 Statement of Cash Flows – Proprietary Funds .............................................................................................. 19 Statement of Fiduciary Net Position – Fiduciary Funds ................................................................................. 20 Notes to the Basic Financial Statements.................................................................................................. 21 - 46
Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget to Actual - General Fund ......................................................................................... 48 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget to Actual – Special Revenue Fund ......................................................................... 49
SPENCER COUNTY SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2016
Schedules of the District’s Proportionate Share of the Net Pension Liability ............................................................................................................................................... 50 Schedules of District Contributions ................................................................................................................. 51 Notes to Required Supplementary Information .............................................................................................. 52 Supplementary Information Combining Statements – Non-Major Funds Combining Balance Sheet – Non-Major Governmental Funds ...................................................................... 54 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-Major Governmental Funds............................................................................................... 55 Combining Statement of Fiduciary Net Position – Agency Funds ................................................................. 56 Schools Schedule of Assets, Receipts, Disbursements and Liabilities – All Schools ................................................. 57 Schedule of Assets, Receipts, Disbursements and Liabilities – Spencer County High School ................................................................................................................ 58 – 59 Schedule of Expenditures of Federal Awards ...................................................................................... 61 – 62 Notes to the Schedule of Expenditures of Federal Awards ........................................................................ 63 Schedule of Findings and Questioned Costs ....................................................................................... 64 – 65 Schedule of Prior Year Audit Findings ........................................................................................................... 66 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed In Accordance with Government Auditing Standards .................................................. …67 – 68 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance ........................................... 69 – 70 Management Letter Comments ................................................................................................................. 71 – 72
SMITH & COMPANY CPA’s, PLLC CERTIFIED PUBLIC ACCOUNTANTS FRANCIS X. SMITH, CPA 207 NORTH THIRD STREET FRANCIS X. SMITH II, CPA BARDSTOWN, KENTUCKY 40004 JASON O. STRANGE, CPA TEL 502-348-7576 ________________________ FAX 502-348-7320 www.smithandcocpa.com CLARA N. GUNNING, CPA MEMBERSHIPS: AMERICAN INSTITUTE OF CPA’s KENTUCKY SOCIETY OF CPA’s
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REPORT OF INDEPENDENT AUDITORS Members of the Board of Education Spencer County School District Taylorsville, Kentucky 40071 Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Spencer County School District (the “District”), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the audit requirements prescribed by the Kentucky State Committee for School District Audits in Appendix I of the Independent Auditor’s Contract – General Audit Requirement, Appendix II to the Independent Auditor’s Contract – State Audit Requirements, Appendix III to the Auditor’s Contract – Audit Extension Request, and Appendix IV to the Independent Auditor’s Contract – Instructions for Submission of the Audit Report. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
SMITH & COMPANY CPA’S, PLLC
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the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Spencer County School District, as of June 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, and pension schedules on pages 4 – 10 and 48 – 52 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The combining and individual nonmajor fund financial statements and school activity funds are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.
The combining and individual nonmajor fund financial statements, school activity funds, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements, school activity funds, and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole.
SMITH & COMPANY CPA’S, PLLC
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Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards and the audit requirements prescribed by the Kentucky State Committee for School District Audits in Appendix I of the Independent Auditor’s Contract – General Audit Requirement, Appendix II to the Independent Auditor’s Contract – State Audit Requirements, Appendix III to the Auditor’s Contract – Audit Extension Request, and Appendix IV to the Independent Auditor’s Contract – Instructions for Submission of the Audit Report, we have also issued our report dated November 2, 2016, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance.
Bardstown, Kentucky November 2, 2016
SPENCER COUNTY SCHOOL DISTRICT – TAYLORSVILLE, KY MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) FOR THE YEAR ENDED JUNE 30, 2016
4
As management of the Spencer County School District (District), we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information found within the body of the audit. The reporting model is a combination of both government-wide financial statements and fund financial statements. FINANCIAL HIGHLIGHTS
The ending cash and cash equivalents balance for the District was $26.7 million, including a construction fund cash balance of $17.7 million, and a building fund cash balance of $4.6 million.
The District has no industrial tax base. The District’s property tax base is derived from residential growth and assessments. The property assessment value grew 2.3%. Local tax was levied at a 3.1 percent rate increase of 63 cents per $100 for real estate and tangible property. There was no change in the motor vehicle rate of 56 cents per $100 of assessed property.
The District adopted a budget in May 2016 for the upcoming year with $2.67 million in contingency (11.6% of total budgeted expenditures).
The District refunded approximately $9.5 million by reissuing $10.055 million in 2016 Series Refunding bonds. The refunding of the bonds is expected to decrease total future debt service payments by approximately $919,000.
The District issued $18.235 million in project bonds to complete the new Taylorsville Elementary School.
Employees received a 2% pay increase as mandated by the Kentucky General Assembly in addition to normal step and rank increases.
The District maintains its focus on student achievement and is celebrating the results of the Kentucky Performance Rating for Educational Progress (K-PREP) released by the Kentucky Department of Education. Spencer County is rated a distinguished district.
The financial position of the District remains strong and stable. The District’s governmental funds financial statements reported combined ending fund balance of $27.1 million. Of this total, $3.6 million is unassigned in the general fund. However, due to economic uncertainty, along with the needs of specific instructional priorities, it is necessary to maintain an adequate fund balance to support these initiatives.
OVERVIEW OF FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.
Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the District’s finances, in a manner similar to a private-sector business. The government-wide financial statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of Governmental and Business-Type Activities for the District accompanied by a total column.
These statements are presented on an “economic resources’” measurement focus and the accrual basis of accounting. Accordingly, all of the District’s assets and liabilities, including capital assets as well as long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability incurred. The types of transactions reported as program revenues for the District are reported in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. The government-wide financial statements can be found on pages 11 through 12 of this report.
SPENCER COUNTY SCHOOL DISTRICT – TAYLORSVILLE, KY MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) FOR THE YEAR ENDED JUNE 30, 2016
5
Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. This is a state mandated uniform system and chart of accounts for all Kentucky public school districts utilizing the MUNIS administrative software. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into three categories: governmental, proprietary and fiduciary funds. Fiduciary funds are trust funds established by benefactors to aid in student education, welfare and teacher support. The only proprietary funds are food service and day care operations. All other activities of the district are included in the governmental funds. The basic governmental fund financial statements can be found on pages 13 through 20 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government’s financial position. In the case of the District, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by approximately $12.5 million as of June 30, 2016.
Typically, the largest portion of the District’s net position reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, furniture and equipment and construction in progress); less any related debt used to acquire those assets that are still outstanding. However, as of June 30, 2016, the investment in capital assets is shown as a deficit due to the $18.235 million in bond s issued for the new elementary school while the bond proceeds are reported as restricted net positon. The District uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although the District’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The District’s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. Net Position
The 2016 Government-wide net position compared to 2015 is as follows:
Net Position (Table 1)
(Restated) (Restated)2016 2015 2016 2015 2016 2015
Current and other assets 27,504,521$ 10,810,498$ 315,148$ 329,342$ 27,819,669$ 11,139,840$ Capital assets 32,436,412 31,642,671 150,581 201,977 32,586,993 31,844,648
Total assets 59,940,933 42,453,169 465,729 531,319 60,406,662 42,984,488
Deferred outflows of resources 1,707,737 580,043 192,137 92,975 1,899,874 673,018
Long-term debt 46,267,572 23,963,489 977,330 - 47,244,902 23,963,489 Other liabilities 2,074,810 6,567,497 30,413 733,082 2,105,223 7,300,579
Total liabilities 48,342,382 30,530,986 1,007,743 733,082 49,350,125 31,264,068
Deferred inflows of resources 402,052 502,565 62,748 78,435 464,800 581,000
Net position:Net investment in capital assets (8,676,995) 5,046,437 150,581 201,977 (8,526,414) 5,248,414 Restricted 22,465,574 6,246,248 - - 22,465,574 6,246,248 Unrestricted (884,343) 820,376 (563,206) (389,200) (1,447,549) 431,176
- - Total net position 12,904,236$ 12,113,061$ (412,625)$ (187,223)$ 12,491,611$ 11,925,838$
GovernmentalActivities
Business-typeActivities Total Primary Government
SPENCER COUNTY SCHOOL DISTRICT – TAYLORSVILLE, KY MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) FOR THE YEAR ENDED JUNE 30, 2016
6
The following are significant current year transactions impacting the Statement of Net Position:
Capital assets increased approximately $629,000 due to current year depreciation of $1.20 million offset by FY2016 additions of approximately $1.97 million primarily as a result of construction costs related to the new Taylorsville Elementary School, new computers, buses, and network equipment.
Total long-term obligations for bonds increased approximately $16.9 million as a result of $10.055 million in Series 2016 Refunding bonds and $18.235 million in projects bonds for the new elementary school issued in fiscal year 2016 and scheduled bond principal reductions of approximately $1.6 million. Also, the District paid $38,718 toward a claim related to outstanding claims and deficits of the Kentucky School Boards Insurance Trust (KSBIT). The District’s proportionate share of CERS reported net pension liability increased approximately $1.78 million during fiscal year 2016. As of June 30, 2016, the District’s proportionate share of the CERS net pension liability was $6.98 million (as actuarially determined by CERS).
SPENCER COUNTY SCHOOL DISTRICT – TAYLORSVILLE, KY MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) FOR THE YEAR ENDED JUNE 30, 2016
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Change in Net Position The following Table 2 presents the summary of changes in net position for the fiscal years ending June 30, 2016 and 2015.
Changes in Net Position (Table 2)
2016 2015 2016 2015 2016 2015
REVENUESProgram Revenues Charges for services 166,866$ 12,175$ 802,073$ 743,742$ 968,939$ 755,917$ Operating grants and contributions 1,712,603 3,102,109 975,808 937,581 2,688,411 4,039,690 Capital grants and contributions 376,696 - - - 376,696 - General Revenues Property taxes 6,578,378 6,285,384 - - 6,578,378 6,285,384 Motor vehicle taxes 818,239 766,424 - - 818,239 766,424 Utility taxes 707,458 751,844 - - 707,458 751,844 Franchise taxes 166,332 129,995 - - 166,332 129,995 Investment earnings 59,242 46,137 1,263 1,081 60,505 47,218 State aid formula grants 17,443,848 17,432,872 - - 17,443,848 17,432,872 Gain (loss) on sale of equipment (1,857) - - - (1,857) - Miscellaneous 491,113 595,593 - 599 491,113 596,192
Total revenues 28,518,918 29,122,533 1,779,144 1,683,003 30,298,062 30,805,536
EXPENSESProgram Activities Instruction 15,279,941 15,406,052 - - 15,279,941 15,406,052 Student support 1,242,462 1,299,565 - - 1,242,462 1,299,565 Instruction staff support 1,670,594 1,615,550 - - 1,670,594 1,615,550 District administration support 770,506 776,385 - - 770,506 776,385 School administrative support 1,677,603 1,663,478 - - 1,677,603 1,663,478 Business support 819,576 710,736 - - 819,576 710,736 Plant operation and maintenance 2,804,248 1,729,932 - - 2,804,248 1,729,932 Adult education 68,081 69,700 - - 68,081 69,700 Student transportation 2,282,549 1,900,881 - - 2,282,549 1,900,881 Community service activities 178,824 179,343 - - 178,824 179,343 Other - 12,767 - 12,767 Interest on long-term debt 908,544 892,499 - - 908,544 892,499 Depreciation - unallocated - 1,288,480 - - - 1,288,480 Business-type Activities Food service - - 1,556,399 1,462,141 1,556,399 1,462,141 Child care - - 417,959 267,238 417,959 267,238
Total expenses 27,702,928 27,545,368 1,974,358 1,729,379 29,677,286 29,274,747
Transfers 30,185 - (30,185) - - -
CHANGE IN NET POSITION 846,175$ 1,577,165$ (225,399)$ (46,376)$ 620,776$ 1,530,789$
GovernmentalActivities
Business-typeActivities Total Primary Government
The following are significant current year transactions impacting the Changes in Net Position:
Total revenues decreased approximately $507,000 primarily due to decreases in operating grants and contributions ($1.4 million decrease) offset by increases in property tax revenues.
Total expenses increased approximately $334,000 as a result of increases in Plant Operations and Maintenance expenses of approximately $1.1 million and increases in Student Transportation of approximately $382,000. The majority of these increase are related to depreciation in prior years that was not allocated to specific functions.
SPENCER COUNTY SCHOOL DISTRICT – TAYLORSVILLE, KY MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) FOR THE YEAR ENDED JUNE 30, 2016
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The following provides a breakdown of total primary government revenues for the year ending June 30, 2016:
The following provides a breakdown of total primary government expenses for the year ending June 30, 2016:
SPENCER COUNTY SCHOOL DISTRICT – TAYLORSVILLE, KY MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) FOR THE YEAR ENDED JUNE 30, 2016
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Capital Assets At the end of fiscal year 2016, the School District had approximately $93.2 million invested in land, building and improvements, vehicles, equipment, and construction in process. Table 3 shows fiscal year 2016 and 2015 balances.
Capital Assets, Net of Depreciation (Table 3)
2016 2015 2016 2015 2016 2015
Land 677,346$ 677,346$ -$ -$ 677,346$ 677,346$ Buildings and improvements 28,430,337 29,253,774 - - 28,430,337 29,253,774 Technology Equipment 49,865 108,874 699 3,732 50,564 112,606 Vehicles 1,344,358 1,273,614 - - 1,344,358 1,273,614 General equipment 226,839 215,663 149,882 198,245 376,721 413,908
Total 30,728,745 31,529,271 150,581 201,977 30,879,326 31,731,248
Construction in process 1,707,667 113,400 - - 1,707,667 113,400
Total 32,436,412$ 31,642,671$ 150,581$ 201,977$ 32,586,993$ 31,844,648$
GovernmentalActivities
Business-typeActivities Total Primary Government
The following were major additions and capital assets placed in service during fiscal year 2016:
Buses $ 272,850
Tractor $ 19,500
Computer and Network Peripherals $ 25,042
The District also spent $1,594,267 for construction and related costs for the new Taylorsville Elementary school. The amounts were added to construction in process as of June 30, 2016. Debt At June 30, 2016, the School District had $40,495,000 in bonds outstanding. Of this amount, $3,579,988 is to be paid by the Kentucky School Facility Construction Commission. A total of $1,305,000 is due within one year. General Fund – Budget Highlights The School District's budget is prepared according to Kentucky law and is based on accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances. The most significant budgeted fund is the General Fund. The State Department of Education requires a zero-based budget with any budgeted remaining fund balance shown as a contingency expense in the budget process. For the General Fund, revenues were budgeted at approximately $21.5 million with actual amounts of approximately $22.1 million. Budgeted expenditures of approximately $22.9 million compare with actual expenditures of approximately $22.1 million. The most significant fluctuation is for plant operation and maintenance expenditures for capital items that fell below budget by approximately $212,000 and student transportation where expenditures fell below budget by approximately $327,000. Excess of budgeted revenue is mainly due to on-behalf payments (approximately $449,000 excess).
Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found on pages 21-46 of this report.
SPENCER COUNTY SCHOOL DISTRICT – TAYLORSVILLE, KY MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) FOR THE YEAR ENDED JUNE 30, 2016
10
BUDGETARY IMPLICATIONS In Kentucky the public school fiscal year is July 1 – June 30; other programs, i.e. some federal, operate on a different fiscal year, but are reflected in the district overall budget. By law the budget must have a minimum 2% contingency. The district adopted a budget for 2015-2016 with a contingency that exceeded the 2% minimum. The District has adopted a budget for 2016-2017 with a contingency that exceeds the 2% requirement. ADDITIONAL CONTACT INFORMATION This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the District’s finances and to show the District’s accountability for the money it receives. Questions regarding this report or requests for additional information should be directed to Vicki Goodlett Finance Officer, 207 West Main Street, Taylorsville, KY 40071or by phone at 502-477-3250.
SPENCER COUNTY SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
11
Governmental Business-TypeAssets Activities Activities Total
Current AssetsCash and cash equivalents 26,561,279$ 173,320$ 26,734,599$ Inventory - 42,288 42,288 Accounts receivable:
Taxes - current 207,656 - 207,656 Taxes - delinquent 3,500 - 3,500 Other - 9,761 9,761 Intergovernmental - State 74,113 - 74,113 Intergovernmental - Federal 306,945 89,779 396,724
Prepaid expenses 351,028 - 351,028
Total current assets 27,504,521 315,148 27,819,669
Capital Assets, NetCapital assets, net 32,436,412 150,581 32,586,993
Total Assets 59,940,933 465,729 60,406,662
Deferred Outflows of ResourcesDeferred amount on refunding 526,001 - 526,001 Deferred outflows related to pensions - CERS 1,181,736 192,137 1,373,873
Total Deferred Outflows of Resources 1,707,737 192,137 1,899,874
LiabilitiesCurrent Liabilities
Accounts payable 143,873 7,276 151,149 Accrued salaries and benefits payable 13,687 7,073 20,760 Unearned revenue 120,096 16,064 136,160 Interest payable 193,666 - 193,666 Current portion of bond obligations 1,305,000 - 1,305,000 Current portion of capital lease obligations 215,296 - 215,296 Current portion of claims payable - KSBIT 38,718 - 38,718 Current portion of accrued sick leave 44,474 - 44,474
Total Current Liabilities 2,074,810 30,413 2,105,223
Noncurrent LiabilitiesNoncurrent portion of bond obligations 39,190,000 - 39,190,000 Less: bond discount (363,869) - (363,869) Noncurrent portion of capital lease obligations 1,099,315 - 1,099,315 Noncurrent portion of claims payable - KSBIT 154,872 - 154,872 Noncurrent portion of accrued sick leave 183,678 - 183,678 Net pension liability - CERS 6,003,576 977,330 6,980,906
Total Noncurrent Liabilities 46,267,572 977,330 47,244,902
Total Liabilities 48,342,382 1,007,743 49,350,125
Deferred Inflows of ResourcesDeferred inflows related to pensions - CERS 402,052 62,748 464,800
Net PositionNet investment in capital assets (8,676,995) 150,581 (8,526,414) Restricted 22,465,574 - 22,465,574 Unrestricted (884,343) (563,206) (1,447,549)
Total Net Position 12,904,236$ (412,625)$ 12,491,611$
SPENCER COUNTY SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
12
Charges Operating CapitalFor Grants & Grants & Governmental Business-Type
Expenses Services Contributions Contributions Activities Activities TotalFUNCTIONS / PROGRAMS
Governmental Activities:Instruction 15,279,941$ 158,247$ 1,712,603$ -$ (13,409,091)$ -$ (13,409,091)$ Support Services:
Student 1,242,462 - - - (1,242,462) - (1,242,462) Instruction staff 1,670,594 - - - (1,670,594) - (1,670,594) District administration 770,506 - - - (770,506) - (770,506) School administrative 1,677,603 - - - (1,677,603) - (1,677,603) Business 819,576 - - - (819,576) - (819,576) Plant operation and maintenance 2,804,248 - - - (2,804,248) - (2,804,248) Adult education 68,081 - - - (68,081) - (68,081) Student transportation 2,282,549 8,619 - - (2,273,930) - (2,273,930)
Community service activities 178,824 - - - (178,824) - (178,824) Interest and issue costs on long-term debt 908,544 - - 376,696 (531,848) - (531,848)
Total Governmental Activities 27,702,928 166,866 1,712,603 376,696 (25,446,763) - (25,446,763)
Business-Type Activities:Food service 1,556,399 508,452 943,302 - - (104,645) (104,645) Child care 417,959 293,621 32,506 - - (91,832) (91,832)
Total Business-Type Activities 1,974,358 802,073 975,808 - - (196,477) (196,477)
Total Primary Government 29,677,286$ 968,939$ 2,688,411$ 376,696$ (25,446,763) (196,477) (25,643,240)
General revenues:Taxes:
Property taxes 6,578,378 - 6,578,378 Motor vehicles taxes 818,239 - 818,239 Utility taxes 707,458 - 707,458 Franchise taxes 166,332 - 166,332
Investment earnings 59,242 1,263 60,505 State aid formula grants 17,443,848 - 17,443,848 Gain (loss) on sale of equipment (1,857) - (1,857) Miscellaneous 491,113 - 491,113 Total general revenues 26,262,753 1,263 26,264,016
Transfers 30,185 (30,185) -
Change In Net Position 846,175 (225,399) 620,776
Net Position - Beginning (restated - See Note P) 12,058,061 (187,226) 11,870,835
Net Position - Ending 12,904,236$ (412,625)$ 12,491,611$
Changes In Net PositionNet (Expense) Revenue And
Program Revenues
SPENCER COUNTY SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
13
Special Other TotalGeneral Revenue Construction Governmental Governmental
Fund Fund Fund Funds FundsAssets:
Cash and cash equivalents 4,235,774$ -$ 17,655,416$ 4,770,558$ 26,661,748$ Accounts receivable 285,268 306,945 - - 592,213 Prepaid expenses 351,028 351,028 Investments - - - - -
Total assets 4,872,070$ 306,945$ 17,655,416$ 4,770,558$ 27,604,989$
Liabilities and Fund Balances:Liabilities:
Accounts payable 93,231$ 43,685$ 3,615$ 3,341$ 143,872$ Cash overdraft - 100,469 - - 100,469 Accrued liabilities 57,822 339 - - 58,161 Current portion of claims payable - KSBIT 38,718 - - - 38,718 Unearned revenue 4,200 115,896 - - 120,096
Total liabilities 193,971 260,389 3,615 3,341 461,316
Fund Balances:Nonspendable:
Prepaid expenses 351,028 - - - 351,028 Spendable:
Restricted - 46,556 17,651,801 4,767,217 22,465,574 Committed 451,666 - - - 451,666 Assigned 253,198 - - - 253,198 Unassigned 3,622,207 - - - 3,622,207
Total Fund Balances 4,678,099 46,556 17,651,801 4,767,217 27,143,673
Total liabilities and fund balances 4,872,070$ 306,945$ 17,655,416$ 4,770,558$ 27,604,989$
SPENCER COUNTY SCHOOL DISTRICT RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
14
Total fund balance per fund financial statements 27,143,673$
Amounts reported for governmental activities in the statement of net positionare different because:
Capital assets are not reported in this fund financial statement because they are not current financial resources, but they are reported in thestatement of net position. 32,436,412
Deferred outflows of resources and deferred inflows of resources relatedto the District's proportionate share of these amounts reported by the CERS pension plan are reported in the governmental activities in the Statement of Net Position.
Deferred outflows of resources - CERS 1,181,736$ Deferred inflows of resources - CERS (402,052) 779,684
Certain liabilities are not reported in the fund financial statementbecause they are not due and payable, but they are presented inthe statement of net position.
Bonds payable (40,495,000) Bond discount - unamortized 363,869 Deferred amount on refunding (deferred outflow of resources) 526,001 Interest payable (193,666) Capital lease obligations (1,314,611) Net pension liability - CERS (6,003,576) Claims payable - KSBIT (noncurrent) (154,872) Accrued compensated absences - long-term (183,678) (47,455,533)
Net position for governmental activities 12,904,236$
SPENCER COUNTY SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
15
Special Other TotalGeneral Revenue Construction Governmental Governmental
Fund Fund Fund Funds FundsRevenues:
From local sources:Taxes:
Property 4,752,644$ -$ -$ 1,825,734$ 6,578,378$ Motor vehicle 818,239 - - - 818,239 Utilities 707,458 - - - 707,458 Franchise 166,332 - - - 166,332
Tuition and fees 35,925 - - 121,764 157,689 Earnings on investments 34,965 328 3,206 20,742 59,241 Other local revenues 232,045 78,878 - 225,345 536,268
Intergovernmental - state 15,357,988 1,153,643 - 1,353,460 17,865,091 Intergovernmental - federal 24,392 1,379,009 - - 1,403,401
Total revenues 22,129,988 2,611,858 3,206 3,547,045 28,292,097
Expenditures:Instruction 12,654,034 1,871,715 - 297,941 14,823,690 Support services:
Student 1,112,626 138,378 - 684 1,251,688 Instruction staff 1,198,204 411,045 - 19,611 1,628,860 District administration 742,593 417 - - 743,010 School administrative 1,561,228 25,798 - - 1,587,026 Business 730,095 - - - 730,095 Plant operation and maintenance 1,985,615 - - 14,898 2,000,513 Student transportation 2,112,197 29,524 - 427 2,142,148
Facilities acquisition and maintenance - - 2,065,868 - 2,065,868 Community service activities 3,644 175,180 - - 178,824 Adult education - 68,081 68,081 Debt service:
Principal 217,851 - - 1,620,000 1,837,851 Interest 39,173 - - 789,848 829,021 Bond issue costs - - - 87,821 87,821 Total Expenditures 22,357,260 2,720,138 2,065,868 2,831,230 29,974,496
Excess (deficit) of revenues (227,272) (108,280) (2,062,662) 715,815 (1,682,399) over expenditures
Other financing sources (uses)Proceeds from sale of bonds - - 18,235,000 10,055,000 28,290,000 Payment to refunded bond escrow agent - - - (10,021,797) (10,021,797) Bond premium - - - 54,618 54,618 Proceeds from capital leases 189,408 - - - 189,408 Proceeds from sale of fixed assets 146 - - - 146 Insurance proceeds 228,677 - - - 228,677 Operating transfers in 35,640 140,081 1,479,463 2,033,152 3,688,336 Operating transfers out (80,670) (64,866) - (3,512,614) (3,658,150)
Total other financing sources (uses) 373,201 75,215 19,714,463 (1,391,641) 18,771,238
Net change in fund balances 145,929 (33,065) 17,651,801 (675,826) 17,088,839
Fund balance, July 1, 2015 (Restated) 4,532,170 79,621 - 5,443,043 10,054,834
Fund balance, June 30, 2016 4,678,099$ 46,556$ 17,651,801$ 4,767,217$ 27,143,673$
SPENCER COUNTY SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
16
Net change in total fund balances per fund financial statements 17,088,839$
Amounts reported for governmental activities in the statement of activitiesare different because of the following:
Capital outlays are reported as expenditures in this fund financial statementbecause they use current financial resources, but they are presented asassets in the statement of activities and depreciated over their estimatedeconomic lives. The difference is the amount by which capital outlaysexceed depreciation for the year.
Capital expenditures 1,974,064$ Depreciation (1,178,319) 795,745
Bond and capital lease proceeds are reported as revenues in this fund statement because they create current financial resources, but they are separated andshown as long-term debt on the statement of net position.
Bond proceeds (27,984,456) Capital lease proceeds (189,408) (28,173,864)
Debt service payments are reported as expenditures in this fund financial statementbecause they use current financial resources, but they are separated and shown as payments of long-term debt on the statement of net position and interest expenseon the statement of activities. The difference is the amount of principal paymentmade for the year.
Principal payments on bonds 11,100,000 Principal payments for capital leases 217,851 11,317,851
In the statement of activities, only the gain (loss) on sale of fixed assets is reported,whereas in the governmental funds, the proceeds for the sale increasedfinancial resources. (2,003)
Generally, expenditures recognized in this fund financial statement are limitedto only those that use current financial resources, but expenses arerecognized in the statement of activities when they are incurred.
Compensated absences - long-term 72,020$ Changes in interest payable, discounts, and deferred amounts on refunding 550,094 Pension expense related to changes in the net pension liability and the net changes in deferred inflows of resources and deferred outflows of resources for CERS (802,507) (180,393)
Change in net position of governmental activities 846,175$
SPENCER COUNTY SCHOOL DISTRICT STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
17
Food ChildService Care
Assets Fund Fund TotalCurrent Assets
Cash and cash equivalents 153,540$ 19,780$ 173,320$ Accounts receivable 363 9,398 9,761 Intergovernmental - indirect federal 89,779 - 89,779 Inventory 42,288 - 42,288
Total current assets 285,970 29,178 315,148
Capital Assets, NetCapital assets, net 150,581 - 150,581
Total assets 436,551$ 29,178$ 465,729$
Deferred Outflows of ResourcesDeferred outflows related to pensions - CERS 129,247$ 62,890$ 192,137$
Liabilities Current Liabilities
Accounts payable 6,080$ 1,196$ 7,276$ Accrued expenses - 7,073 7,073 Unearned revenue 14,428 1,636 16,064
Total current liabilities 20,508 9,905 30,413
Non-Current LiabilitiesNet pension liability - CERS 656,205 321,125 977,330
Total liabilities 676,713$ 331,030$ 1,007,743$
Deferred Inflows of ResourcesDeferred inflows related to pensions - CERS 46,480$ 16,268$ 62,748$
Net PositionNet investment in capital assets 150,581 - 150,581 Unrestricted (307,976) (255,230) (563,206)
Total net position (157,395)$ (255,230)$ (412,625)$
SPENCER COUNTY SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
18
Food ChildService Care
Fund Fund TotalOperating revenues:
Lunchroom sales 507,870$ -$ 507,870$ Tuition and fees - 293,621 293,621 Other operating revenues 582 - 582
Total operating revenues 508,452 293,621 802,073
Operating expenses:Salaries and wages 632,162 352,631 984,793 Materials and supplies 851,487 10,324 861,811 Depreciation 51,160 237 51,397 Other operating expenses 21,590 54,767 76,357
Total operating expenses 1,556,399 417,959 1,974,358
Income (loss) from operations (1,047,947) (124,338) (1,172,285)
Non-operating revenues (expenses):Federal grants 757,920 - 757,920 State grants 86,027 32,506 118,533 Donated commodities 99,355 - 99,355 Fund transfers (30,185) - (30,185) Interest income 1,039 224 1,263
Total non-operating revenues (expenses) 914,156 32,730 946,886
Change in net position (133,791) (91,608) (225,399)
Net position, July 1, 2015, as previously reported 478,734 21,638 500,372
Prior Period Adjustment (Note P) (502,338) (185,260) (687,598)
Net position, July 1, 2015, restated (23,604) (163,622) (187,226)
Net position, June 30, 2016 (157,395)$ (255,230)$ (412,625)$
SPENCER COUNTY SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
19
Food ChildService CareFund Fund Total
Cash Flows From Operating ActivitiesCash received from:
Lunchroom sales 515,892$ -$ 515,892$ Tuition and fees - 294,503 294,503 Other activities 582 - 582
Cash paid to / for:Employees (493,704) (231,280) (724,984) Suppliers (752,971) (9,645) (762,616) Other activities (21,590) (54,767) (76,357)
Net cash provided by (used in) operating activities (751,791) (1,189) (752,980)
Cash Flows From Non-Capital Financing ActivitiesFederal grants 668,141 - 668,141 State grants 16,577 251 16,828 Transfers from (to) other funds (30,185) - (30,185)
Net cash provided by (used in) non-capital financing activities 654,533 251 654,784
Cash Flows From Investing ActivitiesReceipt of interest income 1,039 224 1,263
Net Cash Provided by Investing Activities 1,039 224 1,263
Net increase (decrease) in cash and cash equivalents (96,219) (714) (96,933)
Balances, beginning of year 249,759 20,494 270,253
Balances, end of year 153,540$ 19,780$ 173,320$
Reconciliation of operating income (loss) to net cash provided (used) by operating activities
Operating income (1,047,947)$ (124,338)$ (1,172,285)$
Adjustments to reconcile operating income to net cash provided (used) by operating activitiesDepreciation 51,160 237 51,397 Donated commodities 99,355 - 99,355 State on-behalf payments 69,450 32,255 101,705 GASB 68 Pension expense 71,100 89,246 160,346 Change in assets and liabilities:
Decrease in receivables 8,537 139 8,676 (Increase) in inventory (1,636) - (1,636) (Decrease) Increase in accounts payable (839) 679 (160) (Decrease) in accrued expenses (2,092) (150) (2,242) Increase in deferred revenues 1,121 743 1,864
Net cash provided by (used in) operating activities (751,791)$ (1,189)$ (752,980)$
Schedule of non-cash transactions:Donated commodities 99,355$ -$ 99,355$
State on-behalf payments 69,450$ 32,255$ 101,705$
CERS Pensions 46,752$ 22,518$ 69,270$
SPENCER COUNTY SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2016
See accompanying report of independent auditors and notes to financial statements.
20
AgencyFunds
AssetsCash and cash equivalents 183,587$ Accounts receivable -
Total Assets 183,587$
LiabilitiesAccounts payable -$ Due to student groups 183,587
Total Liabilities 183,587
Net Position Held In Trust -$
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The Spencer County Board of Education (Board), a five-member group, is the level of government which has oversight responsibilities over all activities related to public elementary and secondary school education within the jurisdiction of Spencer County Board of Education (District). The District receives funding from Local, State and Federal government sources and must comply with the commitment requirements of these funding source entities. However, the District is not included in any other governmental “reporting entity” as defined in Section 2100, Codification of Governmental Accounting and Financial Reporting Standards. Board members are elected by the public and have decision making authority, the power to designate management, the responsibility to develop policies which may influence operations and primary accountability for fiscal matters. The District, for financial purposes, includes all of the funds and account groups relevant to the operation of the Spencer County Board of Education. The financial statements presented herein do not include funds of groups and organizations, which although associated with the school system, have not originated within the Board itself such as Band Boosters, Parent-Teacher Associations, etc. The financial statements of the District include those of separately administered organizations that are controlled by or dependent on the Board. Control or dependence is determined on the basis of budget adoption, funding and appointment of the respective governing board. Based on the foregoing criteria, the financial statements of the following organization are included in the accompanying financial statements: Spencer County School District Finance Corporation – In 1988, the Board of Education resolved to authorize the establishment of the Spencer County School District Finance Corporation (a non-profit, non-stock, public and charitable corporation organized under the School Bond Act and KRS 273 and KRS Section 58.180) (the Corporation) as an agency for the District for financing the costs of school building facilities. The members of the Board also comprise the Corporation’s Board of Directors. The Corporation is blended into the District’s financial statements. Basis of Presentation The District’s basic financial statement consist of government-wide statements, including a statement of net position and a statement of activities, and fund financial statements, which provide a more detailed level of financial information. Government-wide Financial Statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within the 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. The statement of net position and the statement of activities display information about the District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statements distinguish between those activities of the District that are governmental and those that are considered business-type activities accompanied by a total column.
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
22
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the District’s assets and liabilities, including capital assets as well as long-term liabilities are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The types of transactions reported as program revenues for the District are reported in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The District applies all Governmental Accounting Standards Boards (“GASB”) pronouncements to proprietary funds as well as the Accounting Principles Board and Financial Accounting Standards Board (“FASB”) pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. Fund Financial Statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are measurable and available. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. Fiduciary funds are reported by fund type. All governmental funds are accounted for on the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statements of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financial sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the District are property tax and utility tax. Expenditures are recorded in the accounting period in which the related fund liability is incurred. The District has the following funds:
I. Governmental Fund Types
A. The General Fund is the main operating fund of the Board. It accounts for financial resources used for general types of operations. This is a budgeted fund and any fund balances are considered as resources available for use. This is a major fund of the District.
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
23
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
B. The Special Revenue (Grant) Funds account for proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to disbursements for specified purposes. It includes federal financial programs where unused balances are returned to the grantor at the close of the specified project periods as well as the state grant programs. Project accounting is employed to maintain integrity for the various sources of funds. The separate projects of federally-funded grant programs are identified in the Schedule of Expenditures of Federal Awards included in this report on pages 61 – 62. This is a major fund of the District.
C. Capital Project Funds are used to account for financial resources to be used for the
acquisition or construction of major capital facilities and equipment (other than those financed by Proprietary Fund).
1. The Support Education Excellence in Kentucky (SEEK) Capital Outlay Fund receives
those funds designated by the state as Capital Outlay Funds and is restricted for use in financing projects identified in the district’s facility plan.
2. The Facility Support Program of Kentucky (FSPK) accounts for funds generated by the building tax levy required to participate in the School Facilities Construction Commission’s construction funding and state matching funds, where applicable. Funds may be used for projects identified in the district’s facility plan.
3. The Construction Fund accounts for proceeds from sales of bonds and other
revenues to be used for authorized construction. This is a major fund of the District.
D. The Debt Service Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditures for principal and interest.
E. The District Activity Fund is a special revenue fund type and is used to account for funds at the school level.
II. Proprietary Fund Types (Enterprise Fund)
A. The Food Service Fund is used to account for school food service activities, including the National School Lunch Program, which is conducted in cooperation with the U.S. Department of Agriculture (USDA). Amounts have been recorded for in-kind contribution of commodities from the USDA. The Food Service Fund is a major fund.
B. The Child Care Fund is used to account for after school revenues and programs where a
fee is charged for participating. III. Fiduciary Fund Type (Agency and Private Purpose Trust Funds)
A. The Agency fund accounts for activities of student groups and other types of activities requiring clearing accounts. These funds are accounted for in accordance with the Uniform Program of Accounting for School Activity Funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Basis of Accounting Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Proprietary and fiduciary funds also use the accrual basis of accounting. Revenues – Exchange and Non-exchange Transactions – Revenues resulting from exchange transactions, in which each party receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenues are recorded in the fiscal year in which the resources are measurable and available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, available means expected to be received within 60 days of the fiscal year-end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the fiscal year when use is first permitted, matching requirements, in which the District must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. On a modified accrual basis, revenues from non-exchange transactions must also be available before it can be recognized. Deferred Revenue – Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before the eligibility requirements are met are recorded as deferred revenue. Expenses/Expenditures – On the accrual basis of accounting, expenses are recognized at the time they are incurred. The fair value of donated commodities used during the year is reported in the statement of revenues, expenses, and changes in net position as an expense with a like amount reported as donated commodities revenue. Unused donated commodities are reported as deferred revenue. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation, are not recognized in governmental funds. Property Taxes Property taxes are levied each September on the assessed value listed as of the prior January 1, for all real and personal property in the county. The billings are considered due upon receipt by the taxpayer; however, the actual date is based on a period ending 30 days after the tax bill mailing. Property taxes collected are recorded as revenues in the fiscal year for which they were levied. All taxes collected are initially deposited into the General Fund and then transferred to the appropriate fund. The property tax rates assessed for the year ended June 30, 2016, to finance the General Fund operations were $0.630 per $100 valuation for real property, $0.630 per $100 valuation for business personal property and $0.560 per $100 valuation for motor vehicles.
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NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED The District levies a utility gross receipts license tax in the amount of 3% of the gross receipts derived from the furnishings, within the district, of telephonic and telegraphic communications services, electric power, water, and natural, artificial and mixed gas. Capital Assets General capital assets are those assets not specifically related to activities reported in the proprietary funds. These assets generally result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the government-wide statement of net position but are not reported in the fund financial statements. Capital assets utilized by the proprietary funds are reported both in the business-type activities column of the government-wide statement of net position and in the respective funds. All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their fair market values as of the date received. The District maintains a capitalization threshold of five thousand dollars. Improvements are capitalized; the cost of normal maintenance and repairs that do not add to the value of the asset or materially extend an assets life are not. All reported capital assets are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives for both general capital assets and proprietary fund assets: Governmental Activities Description Estimated Lives Buildings and Improvements 25-50 years Land Improvements 20 years Technology Equipment 5 years Vehicles 5-10 years Food Service Equipment 10-12 years Furniture and Fixtures 7 years Interfund Balances On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as “interfund receivables/payables”. These amounts are eliminated in the governmental and business-type activities columns of the statements of net position, except for the net residual amounts due between governmental and business-type activities, which are presented as internal balances. For governmental fund financial statements the current portion of unpaid accrued sick leave is the amount expected to be paid using expendable available resources. These amounts are recorded in the account “accumulated sick leave payable” in the general fund. The non-current portion of the liability is not reported.
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NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Budgetary Process Budgetary Basis of Accounting: The District’s budgetary process accounts for certain transactions on a basis other than Generally Accepted Accounting Principles (GAAP). The major differences between the budgetary basis and the GAAP basis are: Revenues are recorded when received in cash (budgetary) as opposed to when susceptible to accrual (GAAP). Expenditures are recorded when paid in cash (budgetary) as opposed to when susceptible to accrual (GAAP). Once the budget is approved, it can be amended. Amendments are presented to the Board at their regular meetings. Such amendments are made before the fact, are reflected in the official minutes of the Board, and are not made after fiscal year end in accordance with state law. Each budget is prepared and controlled by the budget coordinator at the revenue and expenditure function/object level. All budget appropriations lapse at year end. Cash and Cash Equivalents The District considers demand deposits, money market funds, and other investments with an original maturity of 90 days or less, to be cash equivalents. Inventories On government-wide financial statements inventories are stated at cost and are expensed when used. On fund financial statements inventories are stated at cost. The cost of inventory items is recorded as an expenditure in the governmental fund types when purchased. The food service fund uses the specific identification method and the general fund uses the first-in, first-out method. Prepaid Assets Payments made that will benefit periods beyond June 30, 2016 are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of the purchase and an expenditure/expense is reported in the year in which services are consumed. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements, and all payables, accrued liabilities and long-term obligations payable from proprietary funds are reported on the proprietary fund financial statements.
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NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, claims and judgments, the non-current portion of capital leases, accumulated sick leave, contractually required pension contributions and special termination benefits that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they will be paid with current, expendable, available financial resources. In general, payments made within 60 days after year-end are considered to have been made with current available financial resources. Bonds and other long-term obligations that will be paid from governmental funds are not recognized as a liability in the fund financial statements until due. Compensated Absences Compensated absences are payments to employees for accumulated sick leave. These amounts also include the related employer's share of applicable taxes and retirement contributions. District employees may accumulate unused sick leave up to a specified amount depending on their date of hire. Sick leave is payable to employees upon termination or retirement at 30% of the current rate of pay on the date of termination or retirement. The District uses the termination method to calculate the compensated absences amounts. The entire compensated absence liability is reported on the government-wide financial statements. The current portion is the amount estimated to be used in the following year. An expenditure is recognized in the governmental fund as payments come due each period, for example, as a result of employee resignations and retirements. Compensated absences are not recorded at the fund level represent a reconciling item between the fund level and government-wide presentations. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the County Employees Retirement System Non-Hazardous (“CERS”) and Teachers Retirement System of the State of Kentucky (“KTRS”) and additions to/deductions from fiduciary net position have been determined on the same basis as they are reported by the pensions. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Fund Balances Governmental funds report fund balance in classifications based primarily on the extent to which the District is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. Fund balance for governmental funds can consist of the following:
Nonspendable fund balance - amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact.
Restricted fund balance - amounts that are restricted for specific purposes stipulated by external resource providers, constitutionally or through enabling legislation.
Committed fund balance – amounts constrained to specific purposes by the District itself, using its decision making authority to be reported as committed, amounts cannot be used for any other purpose unless the District takes action to remove or change the constraint.
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NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Assigned fund balance - amounts intended to be used by the District for specific purposes that are neither restricted nor committed. The Board and its designees (of which there are none) have the authority to assign amounts to be used for specific purposes.
Unassigned fund balance - This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds.
Sometimes the District will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which resources are considered to be applied. It is the District’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Net Position Net position represents the difference between a). assets and deferred outflows of resources and b). liabilities and deferred inflows of resources. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the School District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. All other net position is reported as unrestricted.
Operating Revenues Operating revenues are those revenues that are generated directly from the primary activity of the proprietary funds. For the School District, those revenues are primarily charges for meals provided by the various schools. Contributions of Capital Contributions of capital in proprietary fund financial statements arise from outside contributions of fixed assets, or from grants or outside contributions of resources restricted to capital acquisition and construction. Interfund Activity Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and as nonoperating revenues/expenses in proprietary funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented on the financial statements.
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NOTE B – ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the District’s management to make estimates and assumptions that affect reported amounts of assets, liabilities, fund balances, and disclosure of contingent assets and liabilities at the date of the general purpose financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. NOTE C – CASH AND CASH EQUIVALENTS At year-end, the carrying amount of the District’s cash and cash equivalents was $26,661,748. $250,000 of bank account balances per separate banks is covered by Federal Depository insurance, with the remainder covered by collateral agreements and collateral held by the pledging banks’ trust departments in the District’s name. Cash equivalents are funds temporarily invested in certificates and securities with a maturity of 90 days or less. Breakdown per financial statements: Governmental Funds $ 26,561,279 Proprietary Funds 173,320 $ 26,734,599 In addition to the cash and cash equivalents listed above, the district has agency funds that are not included in the governmental funds or the proprietary fund balances. The agency funds (school activity funds) at year end were $183,587. Due to the nature of the accounts and limitations imposed by the purposes of the various funds, all cash balances are considered to be restricted except for the General Fund. The Kentucky Revised Statutes authorize the District to invest money subject to its control in obligations of the United States; bonds or certificates of indebtedness of Kentucky and its agencies and instrumentalities; savings and loan associations insured by an agency of the United States up to the amount insured; and national or state banks chartered in Kentucky and insured by an agency of the United States providing such banks pledge as security obligations, as permitted by KRS 41.240 (4), having a current quoted market value at least equal to uninsured deposits. The District may legally invest in certificates of deposit and other interest bearing accounts insured by the Federal Deposit Insurance Corporation (FDIC), uncollateralized certificates of deposit rated in one of the three highest categories by a nationally recognized rating agency; obligations of the United States and of its agencies and instrumentalities, including any corporation of the United States government, bonds or certificates of indebtedness of the State of Kentucky and any of its agencies and instrumentalities; or securities issued by a state or local government or any instrumentalities or agency thereof in the United States and rated in one of the three highest categories by a nationally recognized rating agency; commercial paper rated in the highest category by a nationally recognized rating agency and certain mutual funds as more fully described in KRS 66.4 80. All of the investments of the District are held in U.S. government agency obligations, which carry the explicit guarantee of the U.S. government or certificates of deposit that are insured by the FDIC.
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NOTE C – CASH AND CASH EQUIVALENTS – CONTINUED Concentration of Credit Risk – The District, in accordance with KRS 66.480, limits the amount that may be invested at any time in uncollateralized certificates of deposit, bankers acceptances, commercial paper and securities issued by a state or local government or any instrumentality or agency thereof, to 20% of the total amount of funds invested by the District. At June 30, 2016, the District did not hold any investments in excess of this limit. Custodial Credit Risk – Custodial credit risk is the risk that in the event of a bank failure, a government’s deposits may not be returned to it. The District’s deposit policy for custodial credit risk requires compliance with the provisions of state law.
Credit Risk – Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. More specifically, custodial credit risk is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. All investments held by the District are insured or collateralized with securities held by the financial institution in the District’s name.
Interest Rate Risk – lnterest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. The District manages its exposure to declines in fair value by purchasing a combination of shorter and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or approaching maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.
NOTE D – TRANSFER OF FUNDS The following transfers were made during the year ending June 30, 2016: Fund Financial Statements:
From Fund To Fund Purpose Amount
General Special Revenue Technology Match $ 61,789General Special Revenue Grant Match 18,881
Capital Outlay Fund Debt Service Fund Debt Service 258,447Building Fund Construction Fund Construction Projects 1,479,463Building Fund Debt Service Fund Debt Service 1,774,705
Special Revenue Special Revenue Operations 59,411Special Revenue General Indirect Costs 5,455
Government-wide Financial Statements:
From Fund To Fund Purpose Amount
Food Service Fund General Fund Indirect Costs $ 30,185
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NOTE E – CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2016 was as follows:
Governmental ActivitiesBalance
July 1, 2015 Increases DecreasesBalance
June 30, 2016
Non-depreciable assets: Land 677,346$ -$ -$ 677,346$ Construction in process 113,400 1,594,267 - 1,707,667 Depreciable assets: Buildings and improvements 40,086,112 12,706 - 40,098,818 Technology equipment 1,979,527 25,042 - 2,004,569 Vehicles 2,783,699 286,850 46,939 3,023,610 General equipment 543,728 55,199 14,969 583,958
Totals at historical cost 46,183,812 1,974,064 61,908 48,095,968
Accumulated depreciation: Buildings and improvements 10,832,338 836,143 - 11,668,481 Technology equipment 1,870,653 84,051 - 1,954,704 Vehicles 1,510,085 216,106 46,939 1,679,252 General equipment 328,065 42,019 12,965 357,119
Total accumulated depreciation 14,541,141 1,178,319 59,904 15,659,556
Governmental activities capital assets, net 31,642,671$ 795,745$ 2,004$ 32,436,412$
Depreciation was charged to government functions as follows:
Instruction 339,161$ Student support 1,690 Instructional staff support 4,100 District administration 2,148 School administration 4,218 Business support 3,490 Plant 608,050 Transportation 215,462
Total 1,178,319$
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NOTE E – CAPITAL ASSETS – CONTINUED
Business-Type ActivitiesBalance
July 1, 2015 Increases DecreasesBalance
June 30, 2016
Depreciable assets: Technology equipment 23,583$ -$ -$ 23,583$ General equipment 891,449 - - 891,449
Totals at historical cost 915,032 - - 915,032
Accumulated depreciation: Technology equipment 19,851 3,033 - 22,884 General equipment 693,203 48,364 - 741,567
Total accumulated depreciation 713,054 51,397 - 764,451
Business-type activities capital assets, net 201,978$ (51,397)$ -$ 150,581$
Construction in process totaling $1,707,667 is related to the construction of the new Taylorsville Elementary School. As of June 30, 2016, the remaining commitment to complete the project totals approximately $15.7 million. NOTE F – LONG-TERM OBLIGATIONS The original amount of each outstanding issue, issue date, and interest rates are summarized below:
Issue Date Original Proceeds Interest Rates
2005 $ 855,000 4.00% 2009 Ref 5,940,000 2.00% - 3.375% 2011 9,740,000 1.00% - 2.50% 2016 Ref 10,055,000 2.00% - 3.8% 2016 18,235,000 2.00% - 2.625%
The District, through the General Fund (including utility taxes and the Support Education Excellence in Kentucky (SEEK) Capital Outlay Fund) is obligated to make payments in amounts sufficient to satisfy debt service requirements on bonds issued by the Spencer County School District Finance Corporation to construct school facilities. The District has an option to purchase the property under lease at any time by retiring the bonds then outstanding. The District entered into “participation agreements” with the School Facility Construction Commission. The Commission was created by the Kentucky General Assembly for the purpose of assisting local school districts in meeting school construction needs. In February 2016, the Board issued $10,055,000 of 2016 School Building Revenue Refunding Bonds with interest rates ranging from 2.0% - 2.625% to advance refund the 2007 Series Bonds principal amount of $9,480,000 with interest rates ranging from 4.125% - 4.50%. The District used the net proceeds along with other resources to purchase state and local government securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 2007 series bonds. As a result, that portion of the 2007 series bonds is considered defeased, and the District has removed the liability from its accounts. The outstanding principal of the defeased bonds is $9,480,000 at June 30, 2016.
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NOTE F – LONG-TERM OBLIGATIONS – CONTINUED The refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $541,797. This difference, reported in the accompanying government-wide financial statements as a deduction from bonds payable, is being charged to operations through the year 2027 using the straight-line method which approximates the effective-interest method. The District completed the refunding to reduce its total debt service payments over the next 11 years by $919,151. The table below sets forth the amount to be paid by the District and the Commission for each year until maturity of all bond issues. The liability for the total bond amount remains with the District and, as such, the total principal outstanding has been recorded in the financial statements. The bonds may be called prior to maturity and redemption premiums are specified in each issue. Assuming no bonds are called prior to scheduled maturity, the minimum obligations of the District, including amounts to be paid by the Commission, at June 30, 2016 for debt service (principal and interest) are as follows:
Principal Interest Principal Interest Principal Interest
2017 $ 936,187 $ 927,859 $ 368,813 $ 84,874 $ 1,305,000 $ 1,012,733 2018 1,540,296 980,611 369,704 80,868 1,910,000 1,061,479 2019 1,583,206 943,504 381,794 71,875 1,965,000 1,015,379 2020 1,623,028 901,448 221,972 62,278 1,845,000 963,726 2021 1,673,228 860,420 226,772 57,478 1,900,000 917,898
2022 - 2026 9,102,155 3,567,419 1,127,845 197,147 10,230,000 3,764,566 2027 - 2031 10,086,812 2,348,763 538,188 82,778 10,625,000 2,431,541 2032 - 2036 10,370,100 935,848 344,900 31,654 10,715,000 967,502
$ 36,915,012 $ 11,465,872 $ 3,579,988 $ 668,952 $ 40,495,000 $ 12,134,824
Spencer County School DistrictKentucky School Facility
Construction Commission Total
Capital Lease Obligations The District has entered into multiple capital lease participation agreements issued by the Kentucky Interlocal School Transportation Association (KISTA) for the purchase of four school buses. Future minimum lease payments under the terms of the lease are as follows:
Year Ending June 302017 $ 246,562 2018 236,975 2019 210,408 2020 178,490 2021 174,871
2022-2026 395,072
1,442,378
Less: amount representing interest (127,767)
Present value of minimum lease payments $ 1,314,611
Current maturities $ 215,296 Non-current maturities 1,099,315
$ 1,314,611
The net book value of the buses under capital lease at June 30, 2016 is $1,237,818.
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NOTE F – LONG-TERM OBLIGATIONS – CONTINUED Capital assets under capital leases are depreciated over the lower of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense.
Changes in Long-term Obligations
Long-term liability activity for the year ended June 30, 2016, was as follows:
Governmental Activties:Balance July 1,
2015 Additions ReductionsBalance June
30, 2016Amounts due in
one yearBonds payable:
Revenue bonds payable $ 23,305,000 $ 28,290,000 $ 11,100,000 $ 40,495,000 $ 1,305,000 Less: discount (65,302) (305,544) (6,977) (363,869) -
Total bonds payable 23,239,698 27,984,456 11,093,023 40,131,131 1,305,000
Other liabilities:KISTA capital lease obligation 1,343,054 189,408 217,851 1,314,611 215,296 Claims payable - KSBIT 232,308 - 38,718 193,590 38,718 Net Pension Liability - CERS 5,201,000 1,779,906 - 6,980,906 - Accrued compensated absences 264,362 958,578 994,788 228,152 44,474
Total other liabilities 7,040,724 2,927,892 1,251,357 8,717,259 298,488
$ 30,280,422 $ 58,896,804 $ 23,437,403 $ 97,696,780 $ 2,908,488
Accumulated Unpaid Sick Leave Benefits Upon retirement from the school system, an employee will receive from the District an amount equal to 30% of the value of accumulated sick leave. Sick leave benefits are accrued as a liability using the termination payment method. An accrual for earned sick leave is made to the extent that it is probable that the benefits will result in termination payments. The liability is based on the School District’s past experience of making termination payments. The entire compensated absence liability is reported on the government-wide financial statements.
For governmental fund financial statements the current portion of unpaid accrued sick leave is the amount expected to be paid using expendable available resources. These amounts are recorded in the account “accumulated sick leave payable” in the general fund. The noncurrent portion of the liability is not reported.
The debt service fund is primarily responsible for paying the bond obligations through funding from the capital outlay and building funds. The general fund is primarily responsible for paying accrued sick leave. NOTE G – FUND BALANCES Restricted fund balances arise when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. At June 30, 2016, the District had $22,219,358 in restricted fund balance for future construction, $199,660 restricted for District Activity funds, and $46,556 restricted for grants.
Committed fund balances are those amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority, which, for the District is the Board of Education. The Board of Education must approve by majority vote the establishment (and modification or rescinding) of a fund balance commitment. The District had $250,000 in committed funds at June 30, 2016 committed for new school opening costs, $183,678 committed for sick leave, and $17,988 for site-based carryforward.
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NOTE G – FUND BALANCES – CONTINUED Assigned fund balances represent amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed. The Board of Education allows program supervisors to complete purchase orders which result in the encumbrance of funds. Assigned fund balance also includes (a) all remaining amounts (except for negative balances) that are reported in governmental funds, other than the general fund, that are not classified as nonspendable and are neither restricted nor committed and (b) amounts in the general fund that are intended to be used for a specific purpose. The District had $15,776 assigned for open purchase orders encumbered at June 30, 2016, $154,874 assigned for future claim assessments, and $82,548 for superintendent’s accrued vacation per contractual agreement. Unassigned fund balance is the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. The District considers unrestricted amounts to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Also, the District has established the order of assigned, committed and restricted when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. NOTE H – RETIREMENT PLANS The District’s employees are provided with two pension plans, based on each position’s college degree requirement. The County Employees Retirement System covers employees whose position does not require a college degree or teaching certification. The Kentucky Teachers Retirement System covers positions requiring teaching certification or otherwise requiring a college degree. General information about the County Employees Retirement System Non-Hazardous (“CERS”) Plan description—Employees whose positions do not require a degree beyond a high school diploma are covered by the CERS, a cost-sharing multiple-employer defined benefit pension plan administered by the Kentucky Retirement System, an agency of the Commonwealth of Kentucky. Under the provisions of the Kentucky Revised Statute (“KRS”) Section 61.645, the Board of Trustees of the Kentucky Retirement System administers CERS and has the authority to establish and amend benefit provisions. The Kentucky Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for CERS. That report may be obtained from http://kyret.ky.gov/. Benefits provided—CERS provides retirement, health insurance, death and disability benefits to Plan employees and beneficiaries. Employees are vested in the plan after five years’ service. For retirement purposes, employees are grouped into three tiers, based on hire date:
Tier 1 Participation date Before September 1, 2008 Unreduced retirement 27 years service or 65 years old Reduced retirement At least 5 years service and 55 years old At least 25 years service and any age Tier 2 Participation date September 1, 2008 – December 31, 2013 Unreduced retirement At least 5 years service and 65 years old Or age 57+ and the sum of service years plus age equal 87 Reduced retirement At least 10 years service and 60 years old
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NOTE H – RETIREMENT PLANS – CONTINUED
Tier 3 Participation date After December 31, 2013 Unreduced retirement At least 5 years service and 65 years old Or age 57+ and the sum of service years plus age equal 87 Reduced retirement Not available
Cost of living adjustments are provided at the discretion of the General Assembly. Retirement is based on a factor of the number of years’ service and hire date multiplied by the average of the highest five years’ earnings. Reduced benefits are based on factors of both of these components. Participating employees become eligible to receive the health insurance benefit after at least 180 months of service. Death benefits are provided for both death after retirement and death prior to retirement. Death benefits after retirement are $5,000 in lump sum. Five years’ service is required for death benefits prior to retirement and the employee must have suffered a duty-related death. The decedent’s beneficiary will receive the higher of the normal death benefit and $10,000 plus 25% of the decedent’s monthly final rate of pay and any dependent child will receive 10% of the decedent’s monthly final rate of pay up to 40% for all dependent children. Five years’ service is required for nonservice-related disability benefits.
Contributions – Required contributions by the employee are based on the tier:
Required Contribution Tier 1 5% Tier 2 5% + 1% for insurance Tier 3 5% + 1% for insurance
General information about the Teachers’ Retirement System of the State of Kentucky (“KTRS”) Plan description—Teaching certified employees of the District and other employees whose positions require at least a college degree are provided pensions through the Teachers’ Retirement System of the State of Kentucky (KTRS)—a cost-sharing multiple-employer defined benefit pension plan with a special funding situation established to provide retirement annuity plan coverage for local school districts and other public educational agencies in the Commonwealth. KTRS was created by the 1938 General Assembly and is governed by Chapter 161 Section 220 through Chapter 161 Section 990 of the KRS. KTRS is a blended component unit of the Commonwealth of Kentucky and therefore is included in the Commonwealth’s financial statements. KTRS issues a publicly available financial report that can be obtained at http://www.ktrs.ky.gov/05_publications/index.htm. Benefits provided—For employees who have established an account in a retirement system administered by the Commonwealth prior to July 1, 2008, employees become vested when they complete five (5) years of credited service. To qualify for monthly retirement benefits, payable for life, employees must either:
1.) Attain age fifty-five (55) and complete five (5) years of Kentucky service, or 2.) Complete 27 years of Kentucky service.
Employees that retire before age 60 with less than 27 years of service receive reduced retirement benefits. Non-university employees with an account established prior to July 1, 2002 receive monthly payments equal to two (2) percent (service prior to July 1, 1983) and two and one-half (2.5) percent (service after July 1, 1983) of their final average salaries for each year of credited service. New employees
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE H – RETIREMENT PLANS – CONTINUED (including second retirement accounts) after July 1, 2002 will receive monthly benefits equal to 2% of their final average salary for each year of service if, upon retirement, their total service is less than ten years. New employees after July 1, 2002 who retire with ten or more years of total service will receive monthly benefits equal to 2.5% of their final average salary for each year of service, including the first ten years. In addition, employees who retire July 1, 2004 and later with more than 30 years of service will have their multiplier increased for all years over 30 from 2.5% to 3.0% to be used in their benefit calculation. Effective July 1, 2008, the System has been amended to change the benefit structure for employees hired on or after that date. Final average salary is defined as the member’s five (5) highest annual salaries for those with less than 27 years of service. Employees at least age 55 with 27 or more years of service may use their three (3) highest annual salaries to compute the final average salary. KTRS also provides disability benefits for vested employees at the rate of sixty (60) percent of the final average salary. A life insurance benefit, payable upon the death of a member, is $2,000 for active contributing employees and $5,000 for retired or disabled employees. Cost of living increases are one and one-half (1.5) percent annually. Additional ad hoc increases and any other benefit amendments must be authorized by the General Assembly. Contributions—Contribution rates are established by Kentucky Revised Statutes (KRS). Non-university employees are required to contribute 7.625% of their salaries to the Retirement System. University employees are required to contribute 9.105% of their salaries to the Retirement System. The Commonwealth of Kentucky, as a non-employer contributing entity, pays matching contributions at the rate of 16.105% of salaries for local school district and regional cooperative employees hired before July 1, 2008 and 16.105% for those hired after July 1, 2008. For local school district and regional cooperative employees whose salaries are federally funded, the employer contributes 16.105% of salaries. If an employee leaves covered employment before accumulating five (5) years of credited service, accumulated employee pension contributions plus interest are refunded to the employee upon the member’s request. Medical Insurance Plan Plan description—In addition to the pension benefits described above, KRS 161.675 requires KTRS to provide post-employment healthcare benefits to eligible employees and dependents. The KTRS Medical Insurance Fund is a cost-sharing multiple employer defined benefit plan. Changes made to the medical plan may be made by the KTRS Board of Trustees, the Kentucky Department of Employee Insurance and the General Assembly. To be eligible for medical benefits, the member must have retired either for service or disability. The KTRS Medical Insurance Fund offers coverage to employees under the age of 65 through the Kentucky Employees Health Plan administered by the Kentucky Department of Employee Insurance. Once retired employees and eligible spouses attain age 65 and are Medicare eligible, coverage is obtained through the KTRS Medicare Eligible Health Plan.
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE H – RETIREMENT PLANS – CONTINUED Funding policy — The post-employment medical benefit provided by KTRS is financed on a prefunded basis beginning July 1, 2010 with the implementation of the “Shared Responsibility” legislation. In order to fund medical benefits, active member contributions are matched by the state at .75% of members’ gross salaries. Members contributed 1.75% of gross payroll to the KTRS medical plan and beginning July 1, 2010, the contribution increased incrementally to 3.75% on July1, 2015 under the Shared Responsibility Plan. Also, premiums collected form retirees and investment income contributes to funding the medical plan. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the District reported a liability for its proportionate share of the net pension liability for CERS. The District did not report a liability for the District’s proportionate share of the net pension liability for KTRS because the Commonwealth of Kentucky provides the pension support directly to KTRS on behalf of the District. The amount recognized by the District as its proportionate share of the net pension liability, the related Commonwealth support, and the total portion of the net pension liability that was associated with the District were as follows:
District's proportionate share of the net pension liability – CERS
$ 6,980,906
Commonwealth's proportionate share of the KTRS net pension liability associated with the District
84,411,624 Total $ 91,392,530
The net pension liability for each plan was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date.
The District’s proportion of the net pension liability for CERS was based on the actual liability of the employees and former employees relative to the total liability of the System as determined by the actuary. At June 30, 2015, the District’s proportion was 0.16236 percent.
For the year ended June 30, 2016, the District recognized pension expense of $962,848 related to CERS and $1,745,748 related to KTRS. The District also recognized revenue of $1,745,748 for KTRS support provided by the Commonwealth. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE H – RETIREMENT PLANS – CONTINUED
CERS:
Deferred Outflows of Resources
Deferred inflows of
Resources Differences between expected and actual experience
$ 58,014 $ -
Changes of assumptions 703,948 - Net difference between projected and actual earnings on pension plan investments
62,578 464,800
Changes in proportion and differences between District contributions and proportionate share of contributions
53,078 - District contributions subsequent to the measurement date
496,255 -
$ 1,373,873 $ 464,800
$496,255 reported as deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows related to pensions will be recognized in pension expense as follows:
Year ended June 30: 2017 $ 59,324 2018 59,324 2019 59,324 2020 59,324 2021 175,522
Actuarial assumptions - The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:
CERS KTRS Inflation 3.25% 3.50% Salary Increases 4.00% 4.0-8.2% Investment rate of return 7.5% 7.50%
For CERS, Mortality rates were based on the mortality table used for active members is RP-2000 Combined Mortality Table projected with Scale BB to 2013 (multiplied by 50% for males and 30% for females). For healthy retired members and beneficiaries, the mortality table used is the RP-2000 Combined Mortality Table projected with Scale BB to 2013 (setback 1 year for females). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale BB to 2013 (set back 4 years for males) is used for the period after disability retirement.
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE H – RETIREMENT PLANS – CONTINUED For KTRS, Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on a projection of Scale AA to 2020 with a setback of 1 year for females. The last experience study was performed in 2011 and the next experience study is scheduled to be conducted in 2016.
For CERS, the long-term expected return on plan assets is reviewed as part of the regular experience studies prepared every five years. The most recent analysis, performed for the period covering fiscal years 2005 through 2008, is outlined in a report dated August 25, 2009. Several factors are considered in evaluating the long-term rate of return assumption including long-term historical data, estimates inherent in current market data, and a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected return, net of investment expense and inflation) were developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The capital market assumptions developed by the investment consultant are intended for use over a 10-year horizon and may not be useful in setting the long-term rate of return for funding pension plans which covers a longer timeframe. The assumption is intended to be a long-term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. The target allocation and best estimates of arithmetic real rates of return for each major asset class, as provided by CERS’ investment consultant, are summarized in the following table
Asset Class
Target
Allocation
Long-Term Expected Real Rate of Return
Combined Equity 44.0% 5.40% Combined Fixed Income 19.0% 1.50% Real Return (Diversified Inflation Strategies)
10.0% 3.50%
Real Estate 5.0% 4.50% Absolute Return (Diversified Hedge Funds)
10.0% 4.25%
Private Equity 10.0% 8.50% Cash Equivalent 2.0% - 0.25% 100%
For KTRS, the long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class, as provided by KTRS’s investment consultant, are summarized in the following table:
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE H – RETIREMENT PLANS – CONTINUED
Asset Class
Target
Allocation
Long-Term Expected Real Rate of Return
U. S. Equity 45.0% 6.4% Non U.S. Equity 17.0% 6.5% Fixed Income 24.0% 1.6% High Yield Bonds 4.0% 3.1% Real Estate 4.0% 5.8% Alternatives 4.0% 6.8% Cash 2.0% 1.5% 100%
Discount rate—For CERS, the discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that contributions from plan employees and employers will be made at statutory contribution rates. Projected inflows from investment earnings were calculated using the long-term assumed investment return of 7.50%. The long-term investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability. For KTRS, the discount rate used to measure the total pension liability was 4.88%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rates and the employer contributions will be made at statutorily required rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan employees until the 2036 plan year. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments through 2035 and a municipal bond index rate of 3.82% was applied to all periods of projected benefit payments after 2035. The Single Equivalent Interest Rate (SEIR) that discounts the entire projected benefit stream to the same amount as the sum of the present values of the two separate benefit payments streams was used to determine the total pension liability. Sensitivity of CERS and KTRS proportionate share of net pension liability to changes in the discount rate—The following table presents the net pension liability of the District, calculated using the discount rates selected by each pension system, as well as what the District’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate:
1%
Decrease
Current Discount
Rate 1% Increase
CERS 6.50% 7.50% 8.50%District’s proportionate share of the net
pension liability
$ 8,911,989 $ 6,980,906 $ 5,327,098 KTRS 3.88% 4.88% 5.88%District’s proportionate share of the net
pension liability
$ - $ - $ -
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE H – RETIREMENT PLANS – CONTINUED Pension plan fiduciary net position—Detailed information about the pension plan’s fiduciary net position is available in the separately issued financial reports of both CERS and KTRS. Deferred Compensation The District offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Plan, available to all employees, permits them to defer a portion of their salary until future years. This deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. GASB Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, allows entities with little or no administrative involvement who do not perform the investing function for these plans to omit plan assets and related liabilities from their financial statements. The District therefore does not show these assets and liabilities on this financial statement. NOTE I – CONTINGENCIES The District receives funding from Federal, State and Local government agencies and private contributions. These funds are to be used for designated purposes only. For government agency grants, if based upon the grantor’s review, the funds are considered not to have been used for the intended purpose, the grantors may request a refund of monies advanced, or refuse to reimburse the District for its disbursements. The amount of such future refunds and unreimbursed disbursements, if any, is not expected to be significant. Continuation of the District’s grant programs is predicated upon the grantors’ satisfaction that the funds provided are being spent as intended and the grantors’ intent to continue their programs.
In addition, the District operates in a heavily regulated environment. The operations of the District are subject to the administrative directives, rules and regulations of federal and state regulatory agencies, including, but not limited to, the U.S. Department of Education and the Kentucky Department of Education. Such administrative directives, rules and regulations are subject to change by an act of Congress of the Kentucky Legislature or an administrative change mandated by the Kentucky Department of Education. Such changes may occur with little or inadequate funding to pay for the related cost, including the additional administrative burden to comply with a change.
In fiscal year 2015 the District was notified that in order to settle outstanding claims and deficits of the Kentucky School Boards Insurance Trust (KSBIT), a non-profit self-insured pool, an assessment would be made to present and prior insurance trust members.
In August 2014, the District was notified of the final assessment of $309,745. The claim is to be paid over a seven-year period with two payments due the first year. The balance of the claim payable at June 30, 2016 totals $193,590 in the statement of net position. Payments due under the claim at June 30, 2016 are as follows:
Year Ending June 302017 38,718 2018 38,718 2019 38,718 2020 38,718 2021 38,718
$ 193,590
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE J – LITIGATION The District is subject to various other legal actions in various stages of litigation, the outcome of which is not determinable at this time. Management of the District and its legal counsel do not anticipate that there will be any material effect on the combined financial statements as a result of the cases presently in progress. The Spencer County School District is covered by insurance which provides for a defense and response to the litigation. NOTE K – INSURANCE AND RELATED ACTIVITIES The District is exposed to various forms of loss of assets associated with the risks of fire, personal liability, theft, vehicular accidents, errors and omissions, fiduciary responsibility, etc. Each of these risk areas is covered through the purchase of commercial insurance. The District has purchased certain policies which are retrospectively rated which includes Workers’ Compensation insurance. NOTE L – RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. To obtain insurance for errors and omissions and general liability coverage, the District purchases insurance with a commercial insurance company. District purchases insurance through Kentucky Employers Mutual Insurance for workers compensation. The District purchases unemployment insurance through the Kentucky School Board’s Insurance Trust Unemployment Compensation Fund; however, risk has not been transferred to such fund. In addition, the District continues to carry commercial insurance for all other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. NOTE M – DEFICIT OPERATING BALANCES The Food Service Fund and Child Care Fund had a deficit net position at June 30, 2016 in the amounts of $157,395 and $255,230, respectively. The deficit net position is a result of the recording of the net pension liability for CERS as part of the adoption of GASB Statement 68. The following funds had operations that resulted in a current year deficit of revenues over expenditures resulting in a corresponding reduction of net position: Food Service Fund $ 133,791 Child Care Fund 91,608 Special Revenue Fund 33,065 Building Fund 689,374 NOTE N – COBRA Under COBRA, employers are mandated to notify terminated employees of available continuing insurance coverage. Failure to comply with this requirement may put the school district at risk for a substantial loss (contingency).
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
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NOTE O – ON-BEHALF PAYMENTS The District receives on-behalf payments from the State of Kentucky for items including retirement and insurance as well as debt service on-behalf payments from the Kentucky School Facility Construction Commission for debt service. The amount received for the fiscal year ended June 30, 2016 was $4,803,789. These payments were recorded as follows:
General Fund $ 4,325,388 Debt Service Fund 376,696 Food Service Fund 69,450 Child Care Fund 32,255
$ 4,803,789 On-behalf payments consisted of the following: $1,745,748 related to KTRS, $2,604,785 related to payroll items and benefits (primarily health insurance) net of federal reimbursements, $76,560 related to technology, and $376,696 related to debt service. NOTE P – PRIOR PERIOD ADJUSTMENTS During the current year, it was determined that certain prior year assets, deferred outflows, and liabilities were not properly accounted for and, therefore, the prior period has been adjusted in the current year financial statements. Details of the adjustments are as follows:
Governmental Activities
Net position June 30, 2015, as previously reported 13,521,241$
Bond issue costs not expensed in accordance with GASB 65 (1,075,591) Accrued interest omitted at 6/30/2015 (243,020) KISBIT Claim payable (long-term) omitted at 6/30/2015 (154,871) Understatement of bonds payable at 6/30/2015 (55,000) Bond discounts omitted at 6/30/2015 65,302
Net position June 30, 2015, restated 12,058,061$
General Fund
General fund balance June 30, 2015, as previously report 4,570,888$ KISBIT Claim payable omitted - short-term (38,718)
General fund balance June 30, 2015, restated 4,532,170$
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
45
NOTE P – PRIOR PERIOD ADJUSTMENTS – CONTINUED
Food Service Fund Child Care Fund Total
Net position June 30, 2015, as previously reported 478,734$ 21,638$ 500,372$
Prior period adjustment: Net pension liability - CERS (512,559) (189,577) (702,136) Deferred outflows of resources - CERS 68,321 24,654 92,975 Deferred inflows of resources - CERS (58,100) (20,337) (78,437)
Net position June 30, 2015, restated (23,604)$ (163,622)$ (187,226)$
NOTE Q – SUBSEQUENT EVENTS Management has evaluated subsequent events through November 2, 2016, the date which the financial statements were available to be issued. Subsequent to June 30, 2016, the District approved an increase in the property tax rate to 63.7 cents per $100 in assessed value of real estate and personal property. NOTE R – EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT-PERIOD FINANCIAL STATEMENTS In June 2015, the GASB issued Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. This statement is effective for periods beginning after June 15, 2016. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In June 2015, the GASB issued Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This statement is effective for periods beginning after June 15, 2016. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. GASBS No. 75 requires additional accounting and reporting for governments that provides other post-employment benefits (OPEB) other than pensions to its employees. This statement is effective for periods beginning after June 15, 2017. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In June 2015, the GASB issued Statement 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This statement is effective for periods beginning after June 15, 2015. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements.
SPENCER COUNTY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016
46
NOTE R – EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT-PERIOD FINANCIAL STATEMENTS – CONTINUED In August 2015, the GASB issued Statement No. 77, Tax Abatement Disclosures. This Statement requires governments that enter into tax abatement agreements to disclose the following information about the agreements:
1. Brief descriptive information, such as the tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made by tax abatement recipients
2. The gross dollar amount of taxes abated during the period 3. Commitments made by a government, other than to abate taxes, as part of a tax abatement
agreement. This statement is effective for periods beginning after June 15, 2016. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In December 2015, the GASB issued Statement 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. This statement is effective for periods beginning after December 15, 2015. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In December 2015, the GASB issued Statement 79, Certain External Investment Pools and Pool Participants. This statement is effective for periods beginning after December 15, 2015. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In January 2016, the GASB issued Statement 80, Blending Requirements for Certain Component Units—an amendment of GASB Statement No. 14. This statement is effective for periods beginning after December 15, 2015. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In March 2016, the GASB issued Statement 81, Irrevocable Split-Interest Agreements. This statement is effective for periods beginning after December 15, 2016. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In March 2016, the GASB issued Statement 82, Pension Issues—an amendment of GASB Statements No. 67, No. 68, and No. 73. This statement is effective for periods beginning after June 15, 2016. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements.
REQUIRED SUPPLEMENTARY INFORMATION
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE –
BUDGET TO ACTUAL GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors.
48
VarianceFavorable
Original Final Actual (Unfavorable)Revenues:
Taxes:Property 4,772,174$ 4,772,174 4,752,644$ (19,530)$ Motor vehicle 768,000 768,000 818,239 50,239 Utilities 755,000 755,000 707,458 (47,542) Franchise 137,214 137,214 166,332 29,118
Tuition and fees 20,900 20,900 35,925 15,025 Earnings on investments 18,000 18,000 34,965 16,965 Other local revenues 124,975 124,975 232,045 107,070 Intergovernmental - state 14,909,391 14,909,391 15,357,988 448,597 Intergovernmental - federal 38,000 38,000 24,392 (13,608)
Total Revenues 21,543,654 21,543,654 22,129,988 586,334
Expenditures:Instruction 12,474,168 12,634,114 12,654,034 (19,920) Support services: -
Student 1,101,668 1,101,668 1,112,626 (10,958) Instruction staff 1,196,068 1,196,068 1,198,204 (2,136) District administration 817,013 822,267 742,593 79,674 School administrative 1,550,128 1,550,128 1,561,228 (11,100) Business 736,723 750,430 730,095 20,335 Plant operation and maintenance 2,198,077 2,198,077 1,985,615 212,462 Student transportation 2,434,420 2,439,686 2,112,197 327,489
Community service activities 3,640 3,640 3,644 (4) Debt service: -
Principal 217,851 217,851 217,851 - Interest 32,345 32,345 39,173 (6,828) Total Expenditures 22,762,101 22,946,274 22,357,260 595,842
Excess (deficit) of revenues over expenditures (1,218,447) (1,402,620) (227,272) 1,182,176
Other financing sources (uses)Proceeds from capital leases - 181,420 189,408 7,988 Proceeds from the sale of fixed assets - - 146 146 Insurance proceeds - 202,589 228,677 26,088 Contingency (2,935,048) (2,750,523) - 2,750,523 Operating transfers in - 37,071 35,640 (1,431) Operating transfers out (80,953) (81,302) (80,670) 632
Total other financing sources (uses) (3,016,001) (2,410,745) 373,201 2,783,946
Excess (deficit) of revenues and other financing sources over expenditures and other financing uses (4,234,448)$ (3,813,365)$ 145,929$ 3,966,122$
Fund balance, July 1, 2015 4,234,448 3,813,365 4,532,170
Fund balance, June 30, 2016 -$ -$ 4,678,099$
Budget
NOTE – DIFFERENCES BETWEEN BUDGETARY INFLOWS AND OUTFLOWS AND GAAP REVENUES AND EXPENDITURES Both inflows and outflows are equally different in the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds by the amount of on-behalf payments of $6,218,508.
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE –
BUDGET TO ACTUAL SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors.
49
VarianceFavorable
Original Final Actual (Unfavorable)Revenues:
Tuition and fees -$ -$ -$ -$ Earnings on investments 100 200 328 128 Other local revenues 73,820 73,820 78,878 5,058 Intergovernmental - state 1,166,646 1,167,242 1,153,643 (13,599) Intergovernmental - federal 1,330,885 1,344,846 1,379,009 34,163
Total Revenues 2,571,451 2,586,108 2,611,858 25,750
Expenditures:Instruction 1,752,918 1,798,224 1,871,715 (73,491) Support services:
Student 151,779 151,779 138,378 13,401 Instruction staff 434,286 423,944 411,045 12,899 District administration - - 417 (417) School administration 26,875 26,875 25,798 1,077 Business Support 22,043 - - - Student transportation 35,966 34,889 29,524 5,365
Community Service Activities 155,385 158,110 175,180 (17,070) Adult education 67,689 68,126 68,081 45
Total Expenditures 2,646,941 2,661,947 2,720,138 (58,191)
Excess (Deficit) Of Revenues Over Expenditures (75,490) (75,839) (108,280) (32,441)
Other Financing Sources (Uses)Operating transfers in 137,639 140,713 140,081 (632) Operating transfers out (62,149) (64,874) (64,866) 8
Total Other Financing Sources (Uses) 75,490 75,839 75,215 (624)
Excess (Deficit) Of Revenues & Other Financing Sources Over Expenditures & Other Financing Uses -$ -$ (33,065)$ (33,065)$
Fund Balance, July 1, 2015 - - 79,621
Fund Balance, June 30, 2016 -$ -$ 46,556$
Budget
SPENCER COUNTY SCHOOL DISTRICT SCHEDULES OF PROPORTIONATE SHARE OF NET PENSION LIABILITY FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors.
50
KTRS*
2016 2015
District's proportion of the net pension liability 0.000000% 0.000000%
District's proportionate share of the net pension liability -$ -$
Commonwealth's proportionate share of the net pension liability 84,411,624 70,702,066
Total 84,411,624$ 70,702,066$
District's covered-employee payroll 11,492,723$ 11,221,831$
District's proportionate share of the net pension liability as a percentage of its covered payroll 0.0% 0.0%
Plan fiduciary net position as a percentage of the total pension liability 42.49% 45.59%
CERS*
2016 2015
District's proportion of the net pension liability 0.162360% 0.160306%
District's proportionate share of the net pension liability 6,980,906$ 5,201,000$
District's covered-employee payroll 3,939,520$ 3,677,687$
District's proportionate share of the net pension liability as a percentage of its covered payroll 177.20% 141.42%
Plan fiduciary net position as a percentage of the total pension liability 59.97% 66.80%
* The above schedules are presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the District will report available information. Note: The amounts presented for each fiscal year were determined as of the prior fiscal year-end June 30, 2015.
SPENCER COUNTY SCHOOL DISTRICT SCHEDULES OF DISTRICT CONTRIBUTIONS LAST 10 FISCAL YEARS
See accompanying report of independent auditors.
51
KTRS
*2016 2015
Conctractually required contribution 1,908,935$ 1,666,114$
Contributions in relation to the contractually required contribution 1,908,935 1,666,114
Contribution (excess) deficiency -$ -$
District's covered-employee payroll 11,492,723$ 11,221,831$
Contributions a s a percentage of covered employee payroll 16.6% 14.8%
CERS*
2016 2015
Conctractually required contribution 496,255$ 484,764$
Contributions in relation to the contractually required contribution 496,255 484,764
Contribution (excess) deficiency -$ -$
District's covered-employee payroll 3,939,520$ 3,677,687$
Contributions as a percentage of covered employee payroll 12.6% 13.2% Note: The amounts presented for each fiscal year were determined as of the prior fiscal year-end June 30, 2015.
SPENCER COUNTY SCHOOL DISTRICT NOTES TO REQUIRED SUPPLEMENTARY INFORMATION - PENSIONS JUNE 30, 2016
See accompanying report of independent auditors.
52
Changes of benefit terms: The following changes were made by the Kentucky Legislature and reflected in the CERS valuation performed as of June 30 listed below: 2009: A new benefit tier for members who first participate on or after September 1, 2008 was introduced which included the following changes:
1. Tiered Structure for benefit accrual rates 2. New retirement eligibility requirements 3. Different rules for the computation of final average compensation
2014: As cash balance plan was introduced for member whose participation date is on or after January 1, 2014. Changes of assumptions: The following changes were made by the Kentucky Legislature and reflected in the CERS valuation performed as of June 30 listed below:
The assumed investment rate of return was decreased from 7.75% to7.50%. The assumed rate of inflation was reduced from 3.50% to 3.25%. The assumed rate of wage inflation was reduced from 1.00% to 0.75%. Payroll growth assumption was reduced from 4.50% to 4.00%. The mortality table used for active members is RP-2000 Combined Mortality Table projected with
Scale BB to 2013 (multiplied by 50% for males and 30% for females). For healthy retired members and beneficiaries, the mortality table used is the RP-2000 Combined
Mortality Table projected with Scale BB to 2013 (setback 1 year for females). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale BB to 2013 (set back 4 years for males) is used for the period after disability retirement.
The assumed rates of Retirement, Withdrawal and Disability were updated to more accurately reflect experience.
SUPPLEMENTARY INFORMATION
SPENCER COUNTY SCHOOL DISTRICT COMBINING BALANCE SHEET – NON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2016
See accompanying report of independent auditors.
54
Debt CapitalService Outlay Building District
Fund Fund Fund Activity TotalAssets:
Cash and cash equivalents -$ -$ 4,567,557$ 203,001$ 4,770,558$ Accounts receivable - - - - -
Total Assets & Resources -$ -$ 4,567,557$ 203,001$ 4,770,558$
Liabilities & Fund Balances:Liabilities:
Accounts payable -$ -$ -$ 3,341$ 3,341$
Total Liabilities -$ -$ -$ 3,341$ 3,341$
Fund Balances:Restricted -$ -$ 4,567,557$ 199,660$ 4,767,217$
Total Fund Balances - - 4,567,557 199,660 4,767,217
Total Liabilities & Fund Balances -$ -$ 4,567,557$ 203,001$ 4,770,558$
SPENCER COUNTY SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND
BALANCES – NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors.
55
Debt CapitalService Outlay Building District
Fund Fund Fund Activity TotalRevenues:
From Local Sources:Taxes:
Property -$ -$ 1,825,734$ -$ 1,825,734$ Tuition and fees - - - 121,764 121,764 Earnings On Investments - - 20,742 - 20,742 Other Local Revenues - - - 225,345 225,345
Intergovernmental - State 376,696 258,447 718,317 - 1,353,460 Total Revenues 376,696 258,447 2,564,793 347,109 3,547,045
ExpendituresInstruction - - - 297,941 297,941 Student support - - - 684 684 Instruction staff 19,611 19,611 District administration - - - - - Plant operation and maintenance 14,898 14,898 Student transportation 427 427 Debt Service - Principal 1,620,000 - - - 1,620,000 Debt Service - Interest 789,848 - - - 789,848 Debt Service - Issue costs 87,821 - - - 87,821
Total Expenditures 2,497,669 - - 333,561 2,831,230
Excess (deficit) of revenues over expenditures (2,120,973) 258,447 2,564,793 13,548 715,815
Other financing sources (uses)Proceeds from sale of bonds 10,055,000 - - - 10,055,000 Payment to refunded bond escrow agent (10,021,797) - - - (10,021,797) Bond premium 54,618 - - - 54,618 Operating transfers in 2,033,152 - - - 2,033,152 Operating transfers out - (258,447) (3,254,167) - (3,512,614)
Total other financing sources (uses) 2,120,973 (258,447) (3,254,167) - (1,391,641)
Change in fund balances - - (689,374) 13,548 (675,826)
Fund balance, July 1, 2015 - - 5,256,931 186,112 5,443,043
Fund balance, June 30, 2016 -$ -$ 4,567,557$ 199,660$ 4,767,217$
SPENCER COUNTY SCHOOL DISTRICT COMBINING STATEMENT OF FIDUCIARY NET POSITION – AGENCY FUNDS JUNE 30, 2016
See accompanying report of independent auditors.
56
Spencer County Elementary
Talyorsville Elementary
Spencer County Middle
Spencer County High
Total Agency Funds
AssetsCash and cash equivalents 5,094$ 7,440$ 42,884$ 128,169$ 183,587$ Accounts receivable - - - - -
Total assets 5,094$ 7,440$ 42,884 128,169 183,587
LiabilitiesAccounts payable -$ -$ -$ -$ -$ Due to student groups 5,094 7,440 42,884 128,169 183,587
Total liabilities 5,094$ 7,440$ 42,884$ 128,169$ 183,587$
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF ASSETS, RECEIPTS, DISBURSEMENTS, AND LIABILITIES – ALL SCHOOLS AS OF AND FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors.
57
Due to
Cash Cash Student Balance Balance Groups
July 1, 2015 Receipts Disbursements June 30, 2016 June 30, 2016
Spencer County Elementary 3,458$ 105,242$ 103,606$ 5,094$ 5,094$ Taylorsville Elementary 9,940 68,334 70,834 7,440 7,440 Spencer County Middle 26,450 276,029 259,595 42,884 42,884 Spencer County High 131,860 655,996 659,687 128,169 128,169
Totals 171,708$ 1,105,601$ 1,093,722$ 183,587$ 183,587$
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF ASSETS, RECEIPTS, DISBURSEMENTS, AND LIABILITIES – SPENCER
COUNTY HIGH SCHOOL AS OF AND FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors.
58
Accounts Receivable Due to
Cash Cash and due Student Balance Balance from Groups
July 1, 2015 Receipts Disbursements June 30, 2016 other funds June 30, 2016
Donations - 2,013 2,013 -$ -$ -$ YCLUB/KUNA 40 2,993 2,851 182 - 182 World's Travelers 362 - - 362 - 362 Art Club 226 116 62 280 - 280 Band Club 2 125 125 2 - 2 FBLA 139 2,358 2,346 151 - 151 Idea Club 75 - - 75 - 75 Chorus Club 1,322 35,207 31,941 4,588 - 4,588 FCCLA 954 2,031 1,930 1,055 - 1,055 Beta Club 501 3,050 2,741 810 - 810 TSA Club 838 816 1,601 53 - 53 Mu Alpha Theta 5 - - 5 - 5 HOSA 38 4,143 3,755 426 - 426 Hosa National 290 8,532 8,492 330 - 330 State FFA Dodge Truck - 4,080 4,080 - - - Dairy Team 12,592 69,451 69,743 12,300 - 12,300 FFA 18,607 82,187 76,832 23,962 - 23,962 Yearbook 11,463 6,901 11,588 6,776 - 6,776 Chess 159 195 125 229 - 229 Nationa Honor Society 366 902 703 565 - 565 Music Club 36 - - 36 - 36 Spanish Honor Society 95 - - 95 - 95 Community Service Club 457 155 357 255 - 255 Educators Rising 70 1,071 425 716 - 716 Student Council 1,531 600 790 1,341 - 1,341 Military Readiness 12 147 - 159 - 159 Academic Team 246 18 206 58 - 58 M.F. Brown Memorial - 132 100 32 - 32 KLEFOT Art Scholar 1,018 982 2,000 - - - Coca-Cola Public 663 30 - 693 - 693 Coca Cola-Student 424 92 316 200 - 200 General 2,443 3,413 2,095 3,761 - 3,761 Prom 2,555 15,320 12,389 5,486 - 5,486 Class of 2018 2,979 6,007 770 8,216 - 8,216 Class of 2016 1,774 334 2,108 - - - Class of 2017 PGRAD 21 4,398 1,265 3,154 - 3,154 Class of 2017 - 576 - 576 - 576 Senior Trip 24 25,926 25,950 - - - Senior Picnic 381 878 818 441 - 441 Senior Grad Lunch - 1,411 1,351 60 - 60 2016 Project Grad - 5,161 5,161 - - - Fellow of Christ 302 841 942 201 - 201 Athletics 6,263 30,097 36,360 - - - District Tournament - 10,659 10,659 - - - Concessions 500 27,963 24,222 4,241 - 4,241 Charitable Gaming (5) 5 - - - - Baseball 8,763 36,303 34,556 10,510 - 10,510 Basketball-Boy 8,825 37,070 38,566 7,329 - 7,329 Basketball-Girls 10,425 23,140 29,797 3,768 - 3,768 Dance team 7,362 13,607 18,520 2,449 - 2,449 Cheerleader 869 11,566 11,495 940 - 940 Cross Country 635 2,120 1,094 1,661 - 1,661 Golf-Boys - 4,760 4,316 444 - 444 Golf-Girls 55 150 195 10 - 10
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF ASSETS, RECEIPTS, DISBURSEMENTS, AND LIABILITIES – SPENCER
COUNTY HIGH SCHOOL AS OF AND FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors.
59
Accounts Receivable Due to
Cash Cash and due Student Balance Balance from Groups
July 1, 2015 Receipts Disbursements June 30, 2016 other funds June 30, 2016 (Continued)Soccer-Boys 717 4,490 4,958 249 - 249 Soccer-Girls 1,597 6,881 6,520 1,958 - 1,958 Softball 5,933 11,927 15,233 2,627 - 2,627 Swim 3,326 2,618 1,904 4,040 - 4,040 Tennis-Boys 128 215 259 84 - 84 Girls tennis 128 489 601 16 - 16 Volleyball 8,002 8,316 11,025 5,293 - 5,293 Track 130 700 505 325 - 325 Football 3,482 52,720 53,095 3,107 - 3,107 Wrestling 744 2,729 2,210 1,263 - 1,263 Archery 227 906 909 224 - 224 Faculty - 1,850 1,850 - - - Guidance - 1,043 1,043 - - - Advanced Placement - 16,468 16,468 - - - Parking fees - 1,055 1,055 - - - Instructional Field 664 741 1,405 - - - ESS Summer School 80 2,730 2,810 - - - District Student F - 244 244 - - - District Instr Fees - 14,974 14,974 - - - Art - 2,375 2,375 - - - Band - 2,310 2,310 - - - Career Ag - 840 840 - - - Chorus - 948 948 - - - FCS 1 - 2,370 2,370 - - - Health Career - 3,161 3,161 - - - Language - 347 347 - - - Mathematics - 790 790 - - - Science - 250 250 - - - Social Studies - 431 431 - - - Spanish - 1,120 1,120 - - - Tech Education - 2,844 2,844 - - - FCS #2 - 35 35 - - - Media - 1,887 1,887 - - - Greenhouse - 18,071 18,071 - - - Drama - 165 165 - - - Floral Design - 725 725 - - - Boy's BB Sponsorship - 4,000 4,000 - - - Girls BB Sponsorship - 6,427 6,427 - - - Concessions(25%) - 8,057 8,057 - - - Softball Sponsorships - 750 750 - - - Football Sponsorships - 6,750 6,750 - - - Volleyball Sponsorships - 1,427 1,427 - - - Baseball Sponsorships - 4,300 4,300 - - - Pictures - 1,320 1,320 - - -
Sub Total 131,860 692,828 696,519 128,169 - 128,169
Transfers - 36,832 36,832 - - -
TOTAL 131,860$ 655,996$ 659,687$ 128,169$ -$ 128,169$
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors and notes to the schedule of expenditures of federal wards
61
PassThrough
CFDA Grantor's Federal Federal Grantor / Pass-through Grantor / Program Title Number Number Expenditures
U.S. Department Of EducationPassed through the Kentucky Department of Education
Title I ClusterTitle I - Part A Cluster 84.010 310A 75,799$
310B 254,054 320BE 117,720
TOTAL TITLE I CLUSTER 447,573
Special Education Cluster (IDEA)Special Education - Grants to State 84.027 337A 177,220
337B 350,476
527,696
Special Education - Preschool Grants 84.173 343A 21,696 343B 25,985
47,681
TOTAL SPECIAL EDUCATION CLUSTER (IDEA) 575,377
Vocational Education - Basic Grants to States 84.048 348B 19,217 348AA 673
19,890
Improving Teacher Quality - State Grants 84.367 401A 33,395 401B 32,793
66,188
Twenty-First Century Community Learning Centers 84.287 5504 21,597 5504J 1,000 5504U 5,000 550A 113,614
550AU 3,242
144,453
Investing in Innovation (i3) Fund 84.411 491A 53
Passed Through Kentucky Council on Postsecondary EducationAdult Education - State Grant Program 84.002 365B 8,107
371B 33,419 373B 21,644
63,170
Passed Through Green River Regional Educational CooperativeRace to the Top - District 84.416 436A 27,307
436B 36,816
64,123
Total U.S. Department Of Education 1,380,827
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016
See accompanying report of independent auditors and notes to the schedule of expenditures of federal wards
62
(CONTINUED)
PassThrough
CFDA Grantor's Federal Federal Grantor / Pass-through Grantor / Program Title Number Number Expenditures
U.S. Department Of Health & Human Services
Assistance Programs for Chronic Disease Prevention and Control 93.945 442B 3,000
U.S. Department Of AgricultureChild Nutrition Cluster:Cash AssistancePassed through the Kentucky Department of Agriculture
School Breakfast Program 10.553 090451999 188,749 National School Lunch Program 10.555 090451999 569,172
Noncash Assistance (Commodities)National School Lunch Program 10.555 090451999 99,355
Total U.S. Department Of Agriculture 857,276
Total Federal Program Expenditures 2,241,103$
SPENCER COUNTY SCHOOL DISTRICT NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS JUNE 30, 2016
63
NOTE 1 – BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Spencer County School District and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of the Uniform Guidance. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. NOTE 2 – FOOD DISTRIBUTION Nonmonetary assistance is reported in the schedule at the fair value of the commodities disbursed. NOTE 3 – SUBRECIPIENTS There were no subrecipients during the year ending June 30, 2016.
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS JUNE 30, 2016
64
Section I – Summary of Auditor’s Results
Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiencies(s) identified
that are not considered to be material weaknesses? yes X none reported
Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weakness(es) identified? yes X no Significant deficiencies(s) identified
that are not considered to be material weakness(es)? yes X none reported
Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with the Uniform Guidance? yes X no Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster Child Nutrition Cluster
10.553 School Breakfast Program 10.556 National School Lunch Program
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS JUNE 30, 2016
65
Section I – Summary of Auditor’s Results – Continued
Dollar threshold used to distinguish Between type A and type B programs: $ 750,000 Auditee qualified as low-risk auditee? yes no
Section II – Financial Statement Findings
No findings to report.
Section III – Federal Award Findings and Questioned Costs
No findings or questioned costs to report.
X
SPENCER COUNTY SCHOOL DISTRICT SCHEDULE OF PRIOR YEAR AUDIT FINDINGS JUNE 30, 2016
66
No findings reported.
SMITH & COMPANY CPA’s, PLLC CERTIFIED PUBLIC ACCOUNTANTS FRANCIS X. SMITH, CPA 207 NORTH THIRD STREET FRANCIS X. SMITH II, CPA BARDSTOWN, KENTUCKY 40004 JASON O. STRANGE, CPA TEL 502-348-7576 ________________________ FAX 502-348-7320 www.smithandcocpa.com CLARA N. GUNNING, CPA MEMBERSHIPS: AMERICAN INSTITUTE OF CPA’s KENTUCKY SOCIETY OF CPA’s
67
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Members of the Board of Education Spencer County School District Taylorsville, Kentucky We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America and the requirements prescribed by the Kentucky State Committee for School District Audits in Appendices I, II, III, and IV of the Independent Auditor’s Contract, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Spencer County School District, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Spencer County School District’s basic financial statements and have issued our report thereon dated November 2, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Spencer County School District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Spencer County School District’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
SMITH & COMPANY CPA’S, PLLC
68
Compliance and Other Matters As part of obtaining reasonable assurance about whether the District’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. In addition, the results of our tests disclosed no instances of material noncompliance of specific state statutes or regulations identified in Appendix II of the Independent Auditor’s Contract – State Audit Requirements. We also noted certain other matters that we reported to management of Spencer County School District in a separate letter dated November 2, 2016. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standard and the requirements prescribed by the Kentucky State Committee for School District Audits in Appendices I, II, III, and IV of the Independent Auditor’s Contract in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Bardstown, Kentucky November 2, 2016
SMITH & COMPANY CPA’s, PLLC CERTIFIED PUBLIC ACCOUNTANTS FRANCIS X. SMITH, CPA 207 NORTH THIRD STREET FRANCIS X. SMITH II, CPA BARDSTOWN, KENTUCKY 40004 JASON O. STRANGE, CPA TEL 502-348-7576 ________________________ FAX 502-348-7320 www.smithandcocpa.com CLARA N. GUNNING, CPA MEMBERSHIPS: AMERICAN INSTITUTE OF CPA’s KENTUCKY SOCIETY OF CPA’s
69
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
Members of the Board of Education Spencer County School District Taylorsville, Kentucky Report on Compliance for Each Major Federal Program We have audited the Spencer County School District’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the District’s major federal programs for the year ended June 30, 2016. The Spencer County School District’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the Spencer County School District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and the requirements prescribed by the Kentucky State Committee for School District Audits in Appendices I, II, III, and IV of the Independent Auditor’s Contract. Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Spencer County School District’s compliance.
SMITH & COMPANY CPA’S, PLLC
70
Opinion on Each Major Federal Program In our opinion, the Spencer County School District, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. Report on Internal Control Over Compliance The management of Spencer County School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Spencer County School District’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Spencer County School District’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Bardstown, Kentucky November 2, 2016
SMITH & COMPANY CPA’s, PLLC CERTIFIED PUBLIC ACCOUNTANTS FRANCIS X. SMITH, CPA 207 NORTH THIRD STREET FRANCIS X. SMITH II, CPA BARDSTOWN, KENTUCKY 40004 JASON O. STRANGE, CPA TEL 502-348-7576 ________________________ FAX 502-348-7320 www.smithandcocpa.com CLARA N. GUNNING, CPA MEMBERSHIPS: AMERICAN INSTITUTE OF CPA’s KENTUCKY SOCIETY OF CPA’s
71
Members of the Board of Education Spencer County School District Taylorsville, Kentucky In planning and performing our audit of the financial statements of Spencer County School District for the year ended June 30, 2016, we considered the District’s internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure. However, during our audit we became aware of certain matters that are an opportunity for strengthening internal controls and operating efficiency. The memorandum that accompanies this letter summarizes our comments and suggestions regarding these matters. A separate report dated November 2, 2016 contains our report on the District’s internal control structure. This letter does not affect our report dated November 2, 2016 on the financial statements of the Spencer County School District. We will review the status of our comments during our next audit engagement. We have already discussed the comments and suggestions with various District personnel, and their implementation is currently being reviewed. We will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. This report is intended solely for the information and use of management, members of the board of education, the Kentucky Department of Education, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully,
Bardstown, Kentucky November 2, 2016
SPENCER COUNTY SCHOOL DISTRICT MANAGEMENT LETTER COMMENTS JUNE 30, 2016
72
CURRENT YEAR COMMENTS School Activity Funds – Required Procedures Criteria: The Kentucky Department of Education “Red Book” requires use of specific forms (or reasonable facsimiles) and various procedures for certain activities. The chart below summarizes conditions we noted during our audit.
Conditions: SC MS
SC HS
Multiple receipt forms not signed by students Form F-SA-1 for ticket sales incorrectly completed (tickets were not attached, extended, and reconciled to deposit)
Legend: SCMS – Spencer County Middle School SCHS – Spencer County High School Cause: School personnel and principals did not ensure Red Book compliance for the instances noted above. Effect: Noncompliance with the Red Book policies and procedures could lead to the misappropriation of assets. Recommendation: We recommend the principal and bookkeeper at each school review the “Red Book” and comply with the policy and procedure requirements. Management’s Response: We have stressed compliance with the Red Book to both principals and bookkeepers and require annual Red Book training.
APPENDIX C
Spencer County School District Finance Corporation
School Building Refunding Revenue Bonds
Series of 2017
Official Terms and Conditions of Bond Sale
(C-1)
OFFICIAL TERMS AND CONDITIONS OF BOND SALE
$420,000*
Spencer County School District Finance Corporation
School Building Refunding Revenue Bonds, Series of 2017
Dated as of January 5, 2017
SALE: December 8, 2016 AT 11:00 A.M., E.S.T.
The Spencer County School District Finance Corporation (the "Corporation") will until 11:00 A.M.,
E.S.T., on December 8, 2016 receive at the office of the Executive Director of the Kentucky School Facilities
Construction Commission, 229 W. Main Street, Suite 102, Frankfort, Kentucky 40601, competitive bids for the
purchase of $420,000 principal amount of Spencer County School District Finance Corporation School Building
Refunding Revenue Bonds, Series of 2017 (the "Refunding Bonds"), dated and bearing interest from January 5,
2017, payable on August 1, 2017, and semi-annually thereafter on February 1 and August 1 of each year, in
denominations in multiples of $5,000 within the same maturity, maturing on August 1 in each of the years as
follows:
PRINCIPAL
MATURITY AMOUNT*
2017 $ 45,000
2018 45,000
2019 45,000
2020 45,000
2021 40,000
2022 50,000
2023 50,000
2024 50,000
2025 50,000
* Subject to Permitted Adjustment up to $40,000
REDEMPTION PROVISIONS
The Bonds are NOT subject to redemption at the option of the Corporation prior to their stated maturities.
Notwithstanding the foregoing, the Corporation reserves the right, upon thirty (30) days notice, to call
the Bonds in whole or in part on any date at par for redemption upon the total destruction by fire, lightning,
windstorm or other hazard of any building constituting the Project and apply casualty insurance proceeds to such
purpose.
The Refunding Bonds are to be issued in fully registered form (both principal and interest). U.S. Bank
National Association, Louisville, Kentucky, the Bond Registrar and Paying Agent, shall remit interest on each
semiannual due date to each Registered Owner of record as of the 15th day of the month preceding the due date
which shall be Cede & Co., as the Nominee of The Depository Trust Company ("DTC"). Please see
"Book-Entry-Only-System" below.
SPENCER COUNTY SCHOOL DISTRICT FINANCE CORPORATION
The Corporation has been formed in accordance with the provisions of Sections 162.120 through 162.300
and Section 162.385 of the Kentucky Revised Statutes ("KRS"), and KRS Chapter 273 and KRS 58.180, as a
non-profit, non-stock corporation for the purpose of financing necessary school building facilities for and on
behalf of the Board of Education of the Spencer County, Kentucky School District (the "Board"). Under the
(C-2)
provisions of existing Kentucky law, the Corporation is permitted to act as an agency and instrumentality of the
Board for financing purposes and the legality of the financing plan to be implemented by the Bonds herein referred
to has been upheld by the Kentucky Court of Appeals (Supreme Court) in the case of White v. City of
Middlesboro, Ky. 414 S.W.2d 569.
AUTHORITY AND PURPOSE
The Refunding Bonds are being issued under and in full compliance with the Constitution and Statutes
of the Commonwealth of Kentucky, including Sections 162.120 through 162.300, 162.385, and Section 58.180
of the Kentucky Revised Statutes, within the meaning of the decision of the Court of Appeals of Kentucky
(Supreme Court) in the case of Hemlepp v. Aronberg, 369 S.W.2d 121, for the purpose of providing funds to
retire the outstanding Spencer County School District Finance Corporation School Building Revenue Bonds,
Series of 2005, dated July 1, 2005 (the "Prior Issue") maturing July 1, 2017 and thereafter (the "Defeased
Bonds") prior to their stated maturities on January 12, 2017.
PROCEEDS TO RETIRE ALL BONDS OF PRIOR ISSUE
The Bonds of the Prior Issue were issued under the authority of Sections 162.120 through 162.300 and
162.385 of the Kentucky Revised Statutes for the purpose of providing funds to finance improvements at
Taylorsville Elementary School (the "Project"). Under the terms of the Resolution authorizing the Prior Issue,
those Bonds are payable from the income and revenues of the Project financed from the proceeds thereof. The
Bonds of the Prior Issue are secured by a lien upon and a pledge of revenues from the rental of the Project to
the Board under a Contract, Lease and Option, dated July 1, 2005 (the "Prior Lease").
The total principal amount of the Prior Issue currently outstanding is $1,040,000, scheduled to mature
on August 1 in each of the years 2017 through 2025. The proceeds of the Refunding Bonds will be used to pay
accruing interest on and retire on January 12, 2017 the Defeased Bonds of the Prior Issue.
The 2017 Bond Resolution adopted by the Corporation's Board of Directors authorizes the payment and
retirement of the Defeased Bonds including principal and accruing interest prior to their stated maturities through
the deposit of the required amount of proceeds of the Refunding Bonds in a special Escrow Fund or the Bond
Fund for the Prior Issue for application to the retirement of the Defeased Bonds.
The 2017 Bond Resolution expressly provides that upon delivery of the Refunding Bonds and the deposit
of sufficient funds in accordance with the preceding paragraph neither the lien upon nor the pledge of the
revenues from the rental of the Project under the Prior Lease shall constitute the security and source of payment
for any of the Defeased Bonds of the Prior Issue and the Registered Owners of such Defeased Bonds of the Prior
Issue shall be paid from and secured by the monies deposited in the Escrow Fund or Bond Fund for the
retirement thereof upon the delivery of the Refunding Bonds.
SECURITY FOR REFUNDING BONDS
The Refunding Bonds will constitute a limited indebtedness of the Corporation and will be payable as to
both principal and interest solely from the income and revenues of the school Project financed from the proceeds
of the Prior Issue. The Refunding Bonds are secured by a lien upon and a pledge of the revenues derived from
the rental of the school Project to the Board under a Lease Agreement dated January 5, 2017 (the "2017 Lease");
provided, however, said lien and pledge are on parity with similar liens and pledges securing the Corporation's
School Building Revenue Bonds previously issued to improve the building(s) in which the Project is located (the
"Parity Bonds").
Under the 2017 Lease the Board has leased the school property securing the Refunding Bonds in
accordance with the provisions of KRS 162.140 for an initial period from January 5, 2017 through June 30,
2017, with the option in the Board to renew said 2017 Lease from year to year for one year at a time, at annual
rentals, sufficient in each year to enable the Corporation to pay, solely from the rentals due under the 2017 Lease,
(C-3)
the principal and interest on all of the Refunding Bonds as same become due.
The 2017 Lease provides that the Prior Lease will be canceled effective upon the escrow of sufficient
funds to provide for the retirement of the Defeased Bonds. The 2017 Lease provides further that so long as the
Board exercises its annual renewal options, its rentals will be payable according to the terms and provisions of
the 2017 Lease until August 1, 2025, the final maturity date of the Refunding Bonds, and such annual rentals shall
be deposited as received in the Bond Fund for the Refunding Bonds and used and applied for the payment of all
maturing principal of and interest on the Refunding Bonds.
Under the terms of the 2017 Lease, and any renewal thereof, the Board has agreed so long as the Bonds
remain outstanding, and in conformance with the intent and purpose of KRS 160.160(5), in the event of a failure
by the Board to pay the rentals due under the 2017 Lease, and unless sufficient funds have been transmitted to
the Paying Agent, or will be so transmitted, for paying said rentals when due, the Board has granted under the
terms of the 2017 Lease and Participation Agreement to the Corporation the right to notify and request the
Kentucky Department of Education to withhold from the Board a sufficient portion of any undisbursed funds then
held, set aside, or allocated to the Board and to request said Department or Commissioner of Education to transfer
the required amount thereof to the Paying Agent for the payment of such rentals.
Under the terms of the 2017 Bond Resolution and the 2017 Lease the lien securing the Refunding Bonds
which is created and granted pursuant to KRS 162.200 upon the school Project are and shall be restricted in their
application to the exact location of said school building Project and to such easements and rights of way for
ingress, egress and the rendering of services thereto as may be necessary for the proper use and maintenance
of said school buildings; the right being reserved to erect or construct upon any land not occupied by the school
Project other independently financed school buildings, free and clear of said lien, which other independently
financed school buildings may or may not have a party wall with and adjoin said school building constituting the
Project, provided no part of the cost of said other independently financed school buildings is paid from the
proceeds of the sale of the Refunding Bonds.
BIDDING CONDITIONS AND RESTRICTIONS
(A)The terms and conditions of the sale of the Refunding Bonds are as follows:
(1) Bids must be made on Official Bid Form, contained in Information for Bidders available from the
undersigned or Ross, Sinclaire & Associates, LLC, Louisville, Kentucky, or by visiting
www.rsamuni.com submitted manually, by facsimile or electronically via PARITY®.
(2) Electronic bids for the Bonds must be submitted through PARITY® and no other provider of
electronic bidding services will be accepted. Subscription to the PARITY® Competitive Bidding System
is required in order to submit an electronic bid. The Corporation will neither confirm any subscription
nor be responsible for the failure of any prospective bidders to subscribe. For the purposes of the bidding
process, the time as maintained by PARITY® shall constitute the official time with respect to all bids
whether in electronic or written form. To the extent any instructions or directions set forth in PARITY®
conflict with the terms of the Official Terms and Conditions of Sale of Bonds, this Official Terms and
Conditions of Sale of Bonds shall prevail. Electronic bids made through the facilities of PARITY® shall
be deemed an offer to purchase in response to the Notice of Bond Sale and shall be binding upon the
bidders as if made by signed, sealed written bids delivered to the Corporation. The Corporation shall not
be responsible for any malfunction or mistake made by or as a result of the use of the electronic bidding
facilities provided and maintained by PARITY®. The use of PARITY® facilities are at the sole risk of
the prospective bidders. For further information regarding PARITY®, potential bidders may contact
PARITY®, telephone (212) 404-8102. Notwithstanding the foregoing non-electronic bids may be
submitted via facsimile or by hand delivery utilizing the Official Bid Form.
(3) The minimum bid shall be not less than $415,800 (99% of par) plus accrued interest. Interest rates
shall be in multiples of 1/8 or 1/20 of 1% or both. Only one interest rate shall be permitted per Bond, and
(C-4)
all Bonds of the same maturity shall bear the same rate. Interest rates must be on an ascending scale, in
that the interest rate stipulated in any year may not be less than that stipulated for any preceding maturity.
There is no limit on the number of different interest rates.
(4) The determination of the best purchase bid for said Refunding Bonds shall be made on the basis of
all bids submitted for exactly $420,000 principal amount of Refunding Bonds offered for sale under the
terms and conditions herein specified; provided, however, the Corporation reserves the right to increase
or decrease the total principal amount of Refunding Bonds sold to such best bidder, in the amount of not
exceeding $40,000, with such increase or decrease to be made in any maturity, and the total amount of
Refunding Bonds awarded to such best bidder will be a minimum of $380,000 or a maximum of
$460,000. In the event of any such adjustment, no rebidding or recalculation of a submitted bid will be
required or permitted. The price at which such adjusted principal amount of Bonds will be sold will be
at the same price per $5,000 of Refunding Bonds as the price per $5,000 for the $420,000 of Refunding
Bonds bid.
(5) The successful bidder may elect to notify the Financial Advisor within twenty-four (24) hours of the
award of the Bonds that certain serial maturities as awarded may be combined with immediately
succeeding serial maturities as one or more Term Bonds; provided, however, (a) bids must be submitted
to permit only a single interest rate for each Term Bond specified, and (b) Term Bonds will be subject
to mandatory redemption by lot on August 1 in accordance with the maturity schedule setting the actual
size of the issue.
(6) The successful purchaser shall be required (without further advice from the Corporation) to wire
transfer an amount equal to 2% of the principal amount of Refunding Bonds actually awarded to the
Paying Agent U.S. Bank National Association, Louisville, Kentucky, Attn: Mr. Chuck Lush (Phone:
502-562-6436) by the close of business on the day following the award as a good faith deposit said
amount will be applied (without interest) to the purchase price upon delivery and will be forfeited if the
purchaser fails to take delivery.
(7) All Refunding Bonds of the same maturity shall bear the same and a single interest rate from the date
thereof to maturity.
(8) The right to reject bids for any reason deemed acceptable by the Corporation, and the right to waive
any possible informalities or irregularities in any bid, which in the sole judgment of the Corporation shall
be minor or immaterial, is expressly reserved.
(9) CUSIP identification numbers will be printed on the Refunding Bonds at the expense of the
Corporation. The purchaser shall pay the CUSIP Service Bureau assignment charge. Improper
imprintation or the failure to imprint CUSIP numbers shall not constitute cause for a failure or refusal by
the purchaser to accept delivery of and pay for said Refunding Bonds in accordance with the terms of
any accepted proposal for the purchase of said Bonds.
(B) The Bonds will be delivered utilizing the DTC Book-Entry-Only-System.
(C) Said Bonds are offered for sale on the basis of the principal of said Bonds not being subject to Kentucky ad
valorem taxation and on the basis of the interest on said Bonds not being subject to Federal or Kentucky income
taxation on the date of their delivery to the successful bidder. See TAX EXEMPTION below.
(D) The Corporation will provide to the successful purchaser a Final Official Statement in accordance with SEC
Rule 15c2-12. A Final Official Statement will be provided in Electronic Form to the successful bidder, in
sufficient time to meet the delivery requirements of the successful bidder under SEC and Municipal Securities
Rulemaking Board Delivery Requirements. The successful bidder will be required to pay for the printing of Final
Official Statements.
(C-5)
(E) If, prior to the delivery of the Bonds, any event should occur which alters the tax exempt status of the Bonds,
or of the interest thereon, the purchaser shall have the privilege of avoiding the purchase contract by giving
immediate written notice to the Corporation, whereupon the good faith check of the purchaser will be returned
to the purchaser, and all respective obligations of the parties will be terminated.
(F) The Corporation and the Board agree to cooperate with the successful bidder in the event said purchaser
desires to purchase municipal bond insurance regarding the Refunding Bonds; provided, however, that any and
all expenses incurred in obtaining said insurance shall be solely the obligation of the successful bidder should the
successful bidder so elect to purchase such insurance.
STATE SUPPORT OF EDUCATION
The 1990 Regular Session of the General Assembly of the Commonwealth enacted a comprehensive
legislative package known as the Kentucky Education Reform Act ("KERA") designed to comply with the
mandate of the Kentucky Supreme Court that the General Assembly provide for as efficient and equitable system
of schools throughout the State.
KERA became fully effective on July 13, 1990. Elementary and Secondary Education in the
Commonwealth is supervised by the Commissioner of Education as the Chief Executive Officer of the State
Department of Education ("DOE"), an appointee of the reconstituted State Board for Elementary and Secondary
Education (the "State Board"). Some salient features of KERA are as follows:
KRS 157.330 establishes the fund to Support Education Excellence in Kentucky ("SEEK") funded from
biennial appropriations from the General Assembly for distribution to school districts. The base funding
guaranteed to each school district by SEEK for operating and capital expenditures is determined in each fiscal
year by dividing the total annual SEEK appropriation by the state-wide total of pupils in average daily attendance
("ADA") in the preceding fiscal year; the ADA for each district is subject to adjustment to reflect the number of
at risk students (approved for free lunch programs under state and federal guidelines), number and types of
exceptional children, and transportation costs.
KRS 157.420 establishes a formula which results in the allocation of funds for capital expenditures in
school districts at $100 per ADA pupil which is included in the SEEK allotment ($3,911) for the current biennium
which is required to be segregated into a Capital Outlay Allotment Fund which may be used only for (1) direct
payment of construction costs; (2) debt service on voted and funding bonds; (3) lease rental payments in support
of bond issues; (4) reduction of deficits resulting from over expenditures for emergency capital construction;
and (5) a reserve for each of the categories enumerated in 1 through 4 above.
KRS 157.440(1) requires that effective for fiscal years beginning July 1, 1990 each school district shall
levy a minimum equivalent tax rate of $.30 for general school purposes. The equivalent tax rate is defined as the
rate which results when the income collected during the prior year from all taxes levied by the district (including
utilities gross receipts license and special voted) for school purposes is divided by the total assessed value of
property, plus the assessment for motor vehicles certified by the Revenue Cabinet of the Commonwealth. Any
school district board of education which fails to comply with the minimum equivalent tax rate levy shall be
subject to removal from office.
KRS 157.440(2) provides that for fiscal years beginning July 1, 1990 each school district may levy an
equivalent tax rate which will produce up to 15% of those revenues guaranteed by the SEEK program. Any
increase beyond the 4% annual limitation imposed by KRS 132.017 is not subject to the recall provisions of that
Section. Revenue generated by the 15% levy is to be equalized at 150% of the state-wide average per pupil
equalized assessment.
KRS 157.440(2) permits school districts to levy up to 30% of the revenue guaranteed by the SEEK
program, plus the revenue produced by the 15% levy, but said additional tax will not be equalized with state funds
and will be subject to recall by a simple majority of those voting on the question.
(C-6)
KRS 157.620(1) also provides that in order to be eligible for participation from the Kentucky School
Facilities Construction Commission for debt service on bond issues the district must levy a tax which will
produce revenues equivalent to $.05 per $100 of the total assessed value of all property in the district (including
tangible and intangible property and motor vehicles) in addition to the minimum $.30 levy required by KRS
160.470(12). A district having a special voted tax which is equal to or higher than the required $.05 tax, must
commit and segregate for capital purposes at least an amount equal to the required $.05 tax. Those districts
which levy the additional $.05 tax are also eligible for participation in the
Kentucky Facilities Support ("KFS") program for which funds are appropriated separately from SEEK funds and
are distributed to districts in accordance with a formula taking into account outstanding debt and funds available
for payment from both local and state sources under KRS 157.440(1)(b).
KRS 160.460 provides that as of July 1, 1994 all real property located in the Commonwealth subject to
local taxation shall be assessed at 100% of fair cash value.
BIENNIAL BUDGET FOR PERIOD ENDING JUNE 30, 2018
The Kentucky General Assembly, during its Regular Session, adopted a budget for the biennium ending
June 30, 2018 which was approved and signed by the Governor. Such budget was effective beginning July 1,
2016.
POTENTIAL LEGISLATION
No assurance can be given that any future legislation, including amendments to the Code, if enacted into
law, or changes in interpretation of the Code, will not cause interest on the Refunding Bonds to be subject,
directly or indirectly, to federal income taxation, or otherwise prevent owners of the Refunding Bonds from
realizing the full current benefit of the tax exemption of such interest. In addition, current and future legislative
proposals, if enacted into law, may cause interest on state or local government bonds (whether issued before,
on the date of, or after enactment of such legislation) to be subject, directly or indirectly, to federal income
taxation by, for example, changing the current exclusion or deduction rules to limit the amount of interest on such
bonds that may currently be treated as tax exempt by certain individuals. Prospective purchasers of the
Refunding Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation.
Further, no assurance can be given that the introduction or enactment of any such future legislation, or any
action of the IRS, including but not limited to regulation, ruling, or selection of the Refunding Bonds for audit
examination, or the course or result of any IRS examination of the Refunding Bonds or obligations which present
similar tax issues, will not affect the market price for the Refunding Bonds.
CONTINUING DISCLOSURE
As a result of the principal amount of Bonds being offered not exceeding $1,000,000 Bond Counsel has
advised the Corporation and the Board that they are exempt from application of the Rule 15c2-12c2-12(b)(5) of
the Securities and Exchange Commission with respect to the Bonds.
Financial information regarding the Board may be obtained from Superintendent, Spencer County Board
of Education, 207 West Main Street, Taylorsville, Kentucky 40071 (502) 477-3250.
TAX EXEMPTION; "BANK QUALIFIED"
Bond Counsel advises as follows:
(A) The Refunding Bonds and the interest thereon are exempt from income and ad valorem taxation by the
Commonwealth of Kentucky and all of its political subdivisions.
(B) The interest income from the Refunding Bonds is excludable from the gross income of the recipient thereof
for Federal income tax purposes under existing law; provided, that the corporate entities noted below are advised
(C-7)
of certain tax consequences as follows:
(1) In the computation of the corporate minimum tax, earnings and profits may include otherwise
tax-exempt interest on the Refunding Bonds; this provision applies to corporations only.
(2) Property and casualty insurance companies may be denied certain loss reserve deductions to the
extent of otherwise tax-exempt interest on the Refunding Bonds.
(C) As a result of designations and certifications by the Board and the Corporation, indicating the issuance of less
than $10,000,000 of tax-exempt obligations during the calendar year ending December 31, 2017, the Bonds may
be treated by financial institutions as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code.
(D) The interest income from the Refunding Bonds is excludable from the gross income of the recipient thereof
for Federal income tax purposes under existing law for individuals; however, said income must be included in
the calculation of "modified adjusted gross income" in the determination of whether and to what extent Social
Security benefits are subject to Federal income taxation.
The Corporation will provide the purchaser the customary no-litigation certificate, and the final approving
Legal Opinions of Steptoe & Johnson PLLC, Bond Counsel and Special Tax Counsel, Louisville, Kentucky
approving the legality of the Bonds. These opinions will accompany the Bonds when delivered, without expense
to the purchaser.
BOOK-ENTRY-ONLY-SYSTEM
The Refunding Bonds shall utilize the Book-Entry-Only-System administered by The Depository Trust
Company ("DTC").
DTC will act as securities depository for the Bonds. The Bonds initially will be issued as fully-registered
securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Bond
Certificate will be issued, in the aggregate principal amount of the Bonds, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. "Direct Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and
by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its participants
are on file with the Securities and Exchange Commission.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will
receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participant's records. Beneficial Owners
will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic statements of their holdings, from
the Direct or Indirect Participant through which the beneficial Owner entered into the transaction. Transfers of
ownership interests in the Bonds ("Beneficial Ownership Interest") are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
(C-8)
representing their Beneficial Ownership interests in Bonds, except in the event that use of the book-entry system
for the Securities is discontinued. Transfers of ownership interest in the Securities are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Securities, except in the event that use of the
book-entry system for the Securities is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name
of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name
of Cede & Co., effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such
Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants
to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners, will be
governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Bonds are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures,
DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are
credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments of the Bonds will be made to DTC. DTC's practice is to credit Direct
Participants' account on payable date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of DTC, the Issuer, or the Trustee, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Issuer or the Trustee, disbursements of such payments to Direct Participants shall be the
responsibility of DTC, and disbursements of such payment to the Beneficial Owners shall be the responsibility
of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Beneficial Ownership Interests purchased or
tendered, through its Participant, to the Trustee, and shall effect delivery of such Beneficial Ownership Interests
by causing the Direct Participant to transfer the Participant's interest in the Beneficial Ownership Interests, on
DTC's records, to the purchaser or the Trustee, as appropriate. The requirements for physical delivery of Bonds
in connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownership
rights in the Bonds are transferred by Direct Participants on DTC's records.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time
by giving reasonable notice to the Issuer or the Bond Registrar. Under such circumstances, in the event that a
successor securities depository is not obtained, Bond certificates are required to be printed and delivered by the
Bond Registrar.
NEITHER THE ISSUER, THE BOARD NOR THE BOND REGISTRAR/PAYING AGENT WILL HAVE
ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT, INDIRECT PARTICIPANT
OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION BOOKS
OF THE BOND REGISTRAR/PAYING AGENT AS BEING AN OWNER WITH RESPECT TO: (1) THE
BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT
OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR
INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE
PURCHASE PRICE OF TENDERED BONDS OR THE PRINCIPAL OR REDEMPTION PRICE OF OR
INTEREST ON THE BONDS; (4) THE DELIVERY BY ANY DIRECT PARTICIPANT OR INDIRECT
PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED
UNDER THE TERMS OF THE BOND RESOLUTION TO BE GIVEN TO HOLDERS; (5) THE SELECTION
OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL
REDEMPTION OF THE BONDS; OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS
HOLDER.
SPENCER COUNTY SCHOOL DISTRICT FINANCE CORPORATION
By /s/Chuck Adams
Secretary
APPENDIX D
Spencer County School District Finance Corporation
School Building Refunding Revenue Bonds
Series of 2017
Official Bid Form
(D-1)
OFFICIAL BID FORM(Bond Purchase Agreement)
The Spencer County School District Finance Corporation ("Corporation"), will until 11:00 A.M., E.S.T., on December 8, 2016,receive in the office of the Executive Director of the Kentucky School Facilities Construction Commission, Suite 102, 229 W.Main Street, Frankfort, Kentucky 40601, (telephone 502-564-5582; Fax 888-979-6152) competitive bids for its $420,000 SchoolBuilding Refunding Revenue Bonds, Series of 2017, dated as of January 5, 2017; maturing August 1, 2017 through 2025("Bonds").
We hereby bid for said $420,000* principal amount of Bonds, the total sum of $_______________ (not less than $415,800)plus accrued interest from the dated date payable August 1, 2017 and semiannually thereafter (rates on ascending scale inmultiples of 1/8 or 1/20 of 1%; number of interest rates unlimited) and maturing as to principal on August 1, in each of the yearsas follows:
Year Amount* Rate
2017 $45,000 ________%2018 45,000 ________%2019 45,000 ________%2020 45,000 ________%2021 40,000 ________%2022 50,000 ________%2023 50,000 ________%2024 50,000 ________%2025 50,000 ________%
* Subject to Permitted Adjustment up to $40,000.
We understand this bid may be accepted for as much as $460,000 of Bonds or as little as $380,000 of Bonds, at the sameprice per $5,000 Bond, with the variation in such amount occurring in any maturity or all maturities, which will be determinedby the Secretary of the Corporation at the time of acceptance of the best bid.
Electronic bids for the Bonds must be submitted through PARITY® and no other provider of electronic bidding serviceswill be accepted. Subscription to the PARITY® Competitive Bidding System is required in order to submit an electronic bid.The Corporation will neither confirm any subscription nor be responsible for the failure of any prospective bidders to subscribe.For the purposes of the bidding process, the time as maintained by PARITY® shall constitute the official time with respect toall bids whether in electronic or written form. To the extent any instructions or directions set forth in PARITY® conflict withthe terms of the Official Terms and Conditions of Sale of Bonds, this Official Terms and Conditions of Sale of Bonds shallprevail. Electronic bids made through the facilities of PARITY® shall be deemed an offer to purchase in response to the Noticeof Bond Sale and shall be binding upon the bidders as if made by signed, sealed written bids delivered to the Corporation. TheCorporation shall not be responsible for any malfunction or mistake made by or as a result of the use of the electronic biddingfacilities provided and maintained by PARITY®. The use of PARITY® facilities are at the sole risk of the prospective bidders.For further information regarding PARITY®, potential bidders may contact PARITY®, telephone (212) 404-8102.
The successful bidder may elect to notify the Financial Advisor within twenty-four (24) hours of the award of the Bondsthat certain serial maturities as awarded may be combined with immediately succeeding serial maturities as one or more TermBonds; provided, however, (a) bids must be submitted to permit only a single interest rate for each Term Bond specified, and(b) Term Bonds will be subject to mandatory redemption by lot on August 1 in accordance with the maturity schedule settingthe actual size of the issue.
The DTC Book-Entry-Only-System will be utilized on delivery of this issue.
It is understood that the Corporation will furnish the final, approving Legal Opinions of Steptoe & Johnson PLLC, Bondand Special Tax Counsel, Louisville, Kentucky.
No certified or bank cashier's check will be required to accompany a bid, but the successful bidder shall be required to wiretransfer an amount equal to 2% of the principal amount of Refunding Bonds awarded by the close of business on the datefollowing the award. Said good faith amount will be applied (without interest) to the purchase price on delivery. Wire transferprocedures should be arranged through U.S. Bank National Association, Louisville, Kentucky, Attn: Mr. Chuck Lush (Phone:502-562-6436).
Bids must be submitted only on this form and must be fully executed.
If we are the successful bidder, we agree to accept and make payment for the Bonds in Federal Funds within forty-five (45)days of the award and upon acceptance by the Issuer's Financial Advisor this Official Bid Form shall become the Bond PurchaseAgreement.
Respectfully submitted,
__________________________________Bidder
By ________________________________Authorized Officer
___________________________________Address
(D-2)
Total interest cost from January 5, 2017 to final maturity $______________
Plus discount or less any premium $______________
Net interest cost (Total interest cost plus discount or less any premium) $______________
Average interest rate or cost (i.e. NIC) _______________%
The above computation of net interest cost and of average interest rate or cost is submitted for information only and is nota part of this Bid.
Accepted by Ross, Sinclaire & Associates, LLC, as Agent for the Spencer County School District Finance Corporation for$_________________ amount of Bonds at a price of $______________ as follows:
Year Amount Rate Year Amount Rate
2017 _______,000 ________% 2022 _______,000 ________%2018 _______,000 ________% 2023 _______,000 ________%2019 _______,000 ________% 2024 _______,000 ________%2020 _______,000 ________% 2025 _______,000 ________%2021 _______,000 ________%
Dated: December 8, 2016________________________________
Ross, Sinclaire & Associates, LLC,Financial Advisor and Agent for Spencer CountySchool District Finance Corporation